(Bloomberg) -- While Keir Starmer’s Labour Party made a “strong start” engaging with business, the UK is being held back by an aversion to risk when it comes to deploying money from pension funds, said JPMorgan Chase & Co. asset-management executive Patrick Thomson.
The UK has done an “amazing job” attracting international capital, said Thomson, chief executive officer for Europe, the Middle East and Africa at JPMorgan’s asset-management unit. Still, the country must seize the opportunity to fix pension funds’ low rate of investment in UK equities, he said Thursday in a Bloomberg Television interview.
“We have £1.4 trillion of defined benefit pension fund money,” Thomson said. “If you could consolidate that, you get more scale, you get more investment shared risk and more investment in productive finance.” He said the UK has “much more to do” to unlock that investment capital.
Pension reform was outlined as part of Prime Minister Starmer’s legislative agenda during the King’s Speech last week, and Chancellor Rachel Reeves sees pension reform as a key part of her plan to unlock growth in the UK. The Treasury said over the weekend that it’s launching a review of the industry with the aim of driving investment into parts of the domestic economy that deliver growth, including considering the benefits of consolidating UK pension funds.
Thomson pointed to Canada and Holland as examples of places where scale has been used to get better pricing.
“All things being equal,” he said, “you generally get a better outcome for the retiree.”
Reforming how UK pension funds invest has long been seen as key to revitalizing the the country’s sluggish capital markets. A report published last year showed that UK pension funds have drastically cut their exposure to equities in their home market over the past 25 years, removing roughly £400 billion of demand.
“Over the last few years we’ve tended to have a risk-off attitude in the UK, manifested visibly with all the pension funds being compelled or encouraged to invest in long-dated government bonds,” Thomson said. “And I think we really do need to get those animal spirits back.”
--With assistance from Kriti Gupta.
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