It is in stark contract from 1997 when the two sectors held a combined 45.7% of UK quoted shares with the ONS commenting that the downward trend may be caused by several factors, such as companies expecting more profitable returns on overseas shares as well as changes in pension fund regulations.
Moreover, between 2020 and 2022 further estimates from the ONS Financial Survey of Pension Schemes show that trust-based pension fund direct investment in UK equities is lower relative to direct investment in US equities (UK £8 billion less as of 31 December 2022).
It follows renewed efforts from the government to encourage pension funds and insurance companies to up their allocations to UK shares as well as stimulating productive finance.
Cara Spinks Head of Insurance Consulting at leading actuarial consultancy OAC, commented: “Since the 1990s, pension and insurance companies have divested significant capital allocations out of UK shares.
“It in part reflects regulation which encouraged pension and insurance funds to transfer into investment products like corporate and government bonds, but also the better returns that have been on offer from the US stock market.
“With UK stocks continuing to underperform, it is perhaps unsurprising that these companies which have a fiduciary duty to protect their members’ savings have shifted capital away from UK shares.
“The Chancellor and the Prime Minister appear committed to re-invigorating this sector’s investment into UK business and infrastructure so it will be interesting to see whether their efforts – and presumably that of a Labour government if elected in the next year – will shift the dial.”
https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2022
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