Pension Investment in UK Equities

Richard Tice Excerpts

Tuesday 25th November 2025 Westminster Hall

[Richard Tice (Boston and Skegness) (Reform)]

It is a great pleasure to serve under your chairmanship, Mr Stringer. I congratulate the right hon. Member for Salisbury (John Glen) on securing this debate.

In reality, equity investment from pensions is deteriorating because UK equities are not performing relative to their global counterparts. One of the reasons for that is that we have become over-regulated and over-taxed. When the big bang was launched 40 years ago, the City of London became the most important financial centre in the whole world. In the last 10 years, that has changed. That is why, at Bloomberg a couple of weeks ago, I announced the creation of four key working groups to look at a complete reset—a sort of big bang 2. We need to look again at the whole issue of regulation, and at the status of the FCA relative to the PRA and the Bank of England—that is working group No. 1. Working group No. 2 is on pensions and savings. We also need to consider big-picture issues: why, for example, are we giving tax relief on £300 billion of cash ISAs? How does that help the UK economy? Those are the big questions that we need to look at.

The third working group is on small and medium-sized enterprise growth capital. The right hon. Member for Salisbury asked why it is that on second, third and fourth-phase rounds of fundraising, companies are going elsewhere in the world. The truth is that our markets have become too difficult for raising that additional capital. The fourth working group that I have set up—and it will report in six to nine months’ time—is on taxation. We are over-taxed, and we enjoy the longest tax code in the world. At 24,000 pages, it is four times the combined works of “Harry Potter” and nothing like as much fun.

We need to look again at all those issues, and then we need to look at the performance of our pension funds. If we look at the performance of one of the biggest pension funds in the world, the local government pension schemes, which I have been very focused on, we will see that they are being overcharged substantially, by a factor of about five of what they should be paying, and they are underperforming. In the year to March ’25, the LGPS produced a great performance—not—of 3.3%, yet paid out over £2 billion in fees. Frankly, if the active funds cannot match the tracker, why not use a tracker? That is the challenge for the active industry.

One of the reasons that the LGPS is underperforming is because too much of them are invested in unlisted funds, and now invested in what I would call quite woke funds, but that is a whole different issue. People cannot get out of those unlisted funds, which are at 20% to 40%, and those funds cannot be properly valued. The fees are much higher and they are not performing as well. Those are the key reasons why the performance is deteriorating. The 10, 20 and 30-year track records of the local government pension schemes are all at over 7% in the long term, but in the short term, they are rapidly deteriorating because of wrong investment decisions and overpaying fees, and because we have a market in the UK that is over-regulated and over-taxed. All of those things reduce the incentive to invest.

For many people, it is complicated, but fundamentally, if the active fund managers overcharge and underperform, we should not be surprised if investors end up going elsewhere, and that might mean overseas. We need to change the way we look at things, deregulate sensibly and reduce unnecessary taxation in order to improve the quantity of pensions invested in UK-listed equities.

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[Torsten Bell]

He may not have been paid at all. His focus at the beginning of his remarks on growth and one of its key enablers, investment, was right. If we stepped back and forced ourselves to ask, “What is the one thing the British economy needs more of?”, it would be public and private investment. As several hon. Members have said, the UK has the second largest pension scheme in the world, worth £2 trillion. It is our largest source of domestic capital, underpinning not just the retirement we all—or at least most of us—look forward to, but the investment on which our future prosperity depends.

That is why this Government launched and concluded a review of pensions investment within a year of taking office. Those reforms are now being taken forward through the Pension Schemes Bill, as the hon. Member for South West Devon (Rebecca Smith) pointed out. First and foremost, the Bill includes measures to deliver bigger and better pension schemes in the DC market. It requires multi-employer defined contribution pension providers to hold at least £25 billion in assets by 2030 or to be on track to do so by 2035.

That requirement will drive scale and sophistication in workplace DC schemes so that they are better positioned to invest in a fuller range of asset classes, including specialist private markets such as venture capital, which we have not heard much about today but which are key. The biggest gap in UK capital markets is growth finance: the gap that holds back our science and tech start-ups, scale ups and pre-initial public offering companies. That does not take away from the challenges we are raising about public markets, but if we look at our capital markets as a whole, that is our biggest gap.

Pensions can be a key source of funding for those economically critical investments and sectors, which my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson) set out, as he has done many times in the discussions on the Pension Schemes Bill. This is not just theoretical; it is actually starting to happen. Legal & General is investing in post-quantum cryptography and Nest is investing in energy generation. Last week, the Chancellor and I met with Aegon UK, NatWest Cushion and M&G, which have all confirmed that they will invest £200 million in the British Growth Partnership, a fund managed by the British Business Bank investing in cutting edge British businesses and building on British strengths in areas such as clean energy, advanced manufacturing and the medical technology that other Members have talked about in the past.

As we have heard, Members are well aware of the Mansion House accord, a voluntary commitment by 17 major DC funds to invest 10% of their main default funds in private assets by 2030, including 5% in UK private assets. That will boost investment across a range of asset classes, including growth market equities, which we have not touched on much today. That is welcome news driven by a focus on giving savers better returns and showing how pension funds can contribute directly to making Britain the best place to start up, scale up and ultimately list companies. I should emphasise that we should think about our capital markets as a ladder up which firms can climb. Our job is to make that climb easier, not just to focus on the ultimate destination.

Several Members raised the question of transparency. The Pension Schemes Bill includes a new framework under which DC funds will need to disclose their investments in more granular detail, including UK-overseas and asset class split. We will be able to see in more detail what individual schemes are doing. We are doing that so that we can measure their value for money. For the first time, we will be able to see where those funds are invested.

Finally, as Members know, the Bill includes a reserve power, which has been discussed today, to ensure that the change that the pension schemes themselves say is needed in the interest of members happens. I will repeat what I said on the “Making Money” podcast—it is very exciting that the hon. Member for South West Devon had time to tune in. I am confident that this power will not need to be used, given the progress the industry is already making. It is designed as a proportionate backstop to the commitments that the industry has already made, with strong safeguards to protect the interests of pension savers.

On mandation, I note—as gently as possible, given the excellent tone of this discussion—that I have spent much of the last six months hearing strong opposition to any mandation backstop while hearing, often from the very same people, language that does not directly contradict that, but gets close to calling for mandation, whether it is social housing, public equities or anything else. I just gently note that tension before as gently moving on to set out some of the wider steps that the Government are taking to support our capital markets, because they go far beyond pensions. It is important to note that although UK equity markets have faced some challenges in recent years, London’s markets remain some of the deepest and most liquid in the world. We want to build on those strong foundations and make the UK as attractive a destination as possible for companies to start, scale and stay. There is a danger here: we need to make sure we are having this discussion about the change we need to see, while also celebrating many of the real strengths that exist in London’s capital markets.

[Richard Tice]

Is the Minister aware that the quantity of listings on the London stock market has collapsed by about 80% in the last decade, and that the number of companies listed on AIM—the alternative investment market, which was the original growth market 40 years ago—has fallen to a 25-year low, so something fundamental is going wrong with our listed markets?

[Torsten Bell]

I am. I will just gently say that many people, when discussing the reasons for that, point to a policy of Brexit delivered without any ideas about how it should be delivered in a smaller, home market and without any plans for the future. I would probably pause on that before I started offering anyone views on anything at all.

My Treasury colleagues have already delivered an ambitious programme of reforms: modernising UK listing rules; establishing the private intermittent securities and capital exchange system—PISCES—to support private companies to scale and grow as a stepping-stone to public markets; and making it easier to raise capital and IPO in the UK with new prospectus rules from January of next year. To come directly and more fairly to the question that the hon. Member for Boston and Skegness (Richard Tice) raised, I think it is important to celebrate the fact that we have seen some of that translate into positive momentum recently. Hon. Members will know that the stock exchange has had a very strong year, outperforming most of the rest of the world. We saw listings from Fermi America and Shawbrook last month, and there are other exciting companies in the pipeline. I now regularly see my hon. and learned Friend the Economic Secretary to the Treasury in confetti-filled photographs from the stock exchange, and I look forward to seeing many more in the years to come. I encourage hon. Members to go and engage in similar activities.

Our capital markets are not just about celebration and ceremony; they are critical in connecting retail investors’ capital with businesses in the way that several hon. Members mentioned. Investing offers a powerful way for people to make their money work harder and share in growth. That is why the Government are bringing forward measures to get Britain investing again.

The right hon. Member for North West Hampshire (Kit Malthouse) raised a point, which I have heard him discuss before, about risk appetite and the incentives that people have. I would say that if we look at the evidence from the last 25 years, we see that it is not the strength of the incentive that is the issue. Many people holding cash ISAs would have made very significant returns if they had held that in equities instead. I will give an example. If someone, each year since the introduction of ISAs, had put £1,000 into an equity ISA rather than a cash ISA, they would be £50,000 better off. The issue is not purely about incentives, and I think focusing there would miss some of the wider changes we have been seeing, but I am always eager to hear about what more can be done.

What we are doing is working closely with the FCA and rolling out a scheme of targeted support ahead of ISA season next year. That will represent the biggest reform of the financial advice and guidance landscape—mentioned by the hon. Member for South West Devon—in more than a generation. It will revolutionise the support that consumers can receive to invest.

Mansion House Accord

Richard Tice Excerpts

Tuesday 13th May 2025 Commons Chamber

[Torsten Bell]

My hon. Friend is completely right, but I would use a slightly more optimistic tone. It is now the settled consensus of the entire defined-contribution industry that this is the direction we need to move in. Almost every single scheme is moving to thinking about how they will invest in a wider range of private assets. Many of them are looking to go further than the benchmark set out in the accord today. They want to do that because it is in their savers’ interests. It diversifies their assets and, over the longer term, leads to higher returns on average. The exact amount of those returns will obviously depend, but studies show that it ranges from 2% to 12% higher returns. It is absolutely in savers’ interests, and I think there is a broad consensus about doing that.

My hon. Friend is also right to say that we need to make sure that change happens. We will come forward in the pension schemes Bill with more details about how these developments will be monitored to make sure that change is delivered, because in the end, what the British people want to see is less talking about this and more actual investment.

[Richard Tice (Boston and Skegness) (Reform)]

Pension funds are, by definition, long-term capital and are therefore particularly well suited to being invested in long-term infrastructure. British pension funds investing in British infrastructure should be welcomed by us all, but I would caution against any specific mandating within sectors, which I fear may lead to lower performance. The thing about private markets is that they have almost no transparency in terms of valuation and liquidity. I urge the Government to encourage the pension funds voluntarily to be more open about how they value these private investments, to ensure greater confidence.

[Torsten Bell]

I thank the hon. Member for what I think is his support for the accord—

[Richard Tice]

indicated assent.

[Torsten Bell]

He is nodding, so I will take that as support. He will worry that he sounds dangerously like a Liberal Democrat when he sits on the fence as much as he just did. At least the shadow Chancellor has the guts to say he opposes it, because he thinks that that is simple politics to get him through the day. I am glad to see that the hon. Member has not learned enough, and I hope he enjoys the fence sitting while it lasts.

The hon. Member is right to say that schemes will want to be transparent about their asset allocation, partly so that savers can see what is going on, but also, to refer back to the question from my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson), so that the country as a whole can see that progress is being made.

Independent Schools: VAT and Business Rates Relief

Richard Tice Excerpts

Monday 3rd March 2025 Westminster Hall

[John Lamont]

I would be amazed if the voters of Edinburgh endorse the policy in the way that the hon. Gentleman suggests. He should put that suggestion to some of the Facebook groups that support the directly affected Edinburgh parents—some of his constituents are directly affected by the policy—and see how many of their members say they support the policy. I suspect that very few will. If he paid any attention to those groups, he would know how much animosity there is towards the policy among parents in Edinburgh.

[Richard Tice (Boston and Skegness) (Reform)]

Does the hon. Member agree that it is quite possible that this ludicrous policy raises the square root of net zero once we knock off possibly 100,000 children not going to independent schools, the recovery of input costs from schools, the closure of schools and the reduction in bursaries because the schools cannot afford to give them?

[John Lamont]

The hon. Member is absolutely right, and that leads me neatly to my next point. Let us look at what else the Labour Government have claimed. They said:

“Ending tax breaks for private schools was a tough but necessary decision that will secure additional funding to help deliver the Government’s commitments relating to education and young people.”

That supposed extra funding is far from guaranteed. The policy is unlikely to raise what has been stated, and it may well incur far greater costs to taxpayers than anticipated.

Let me state it plainly: nothing about this decision was necessary. This did not need to happen now or in this manner. At the very least, it could have been considered in detail, with all the repercussions weighed up. The Government estimate that in the long term, 37,000 pupils will leave or never enter the UK private school sector as a result of the VAT charge. That number may also prove to be nonsense; if it is, the Government’s entire basis for doing this will fall apart. If the number is higher, the cost to the public finances will be higher and less revenue will be raised. That is a potentially vicious double whammy for the Treasury, inflicted entirely by Labour’s own design.

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[Richard Tice (Boston and Skegness) (Reform)]

It is a pleasure to serve under your chairmanship, Mr Vickers. I congratulate the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) on securing this debate on the back of the petitioners.

[Mrs Emma Lewell-Buck in the Chair]

How many of us were elected to this great place to damage the prospects of our children? I would hope that the answer is none, but that is the direct consequence of this ludicrous policy to tax education. I think we are the only country in the developed world to do so. The unintended consequences are truly shocking. Within a fortnight of the policy coming into force at the beginning of this year, some four schools announced they were closing this summer—over 1,000 children were immediately plunged into uncertainty about where they were going to school and who were going to be their friends. The anxiety that that put on them as children, let alone their parents, should shame everybody in the Government. Tens of thousands of pupils will end up leaving the independent sector—and it is independent, not private, because most independent schools are charities that reinvest their surpluses.

[Dr Arthur]

I have independent schools in my constituency, and the challenges we face with this policy are real, but the numbers people are citing make it difficult to talk about those challenges. People have said that tens of thousands of students are going to move from the independent sector to the state sector, but I do not think anybody really thinks that is going to happen. Those sorts of numbers make it really difficult to have a serious debate about this issue. Does the hon. Gentleman agree that “tens of thousands of students” is perhaps at the upper end of estimates?

[Richard Tice]

I am grateful to the hon. Gentleman, because he has reminded me to declare a historical interest. Not only did I have children in independent schools, but I was the chairman of the finance and general purposes committee for a significant independent school over the past six or seven years; I finished just before the election. Even when this policy was announced as a prospect, I saw an immediate drop-off in applications for places at that school, so I can confirm with absolute experience that tens and tens of thousands, if not 100,000, will leave the sector.

Surely, of all children, those whose prospects we want least of all to damage are those with special educational needs, yet that is where the independent sector excels. Let me give a small example from the county of Lincolnshire. I got a letter from a constituent who can no longer afford to send two children, both with special educational needs, to the independent school. They are going to have to go into the state sector, where there is a capacity crisis that we keep hearing about in the Commons. Because of the distance, she cannot provide the travel, so the county council has to provide it. For those two children alone, the annual cost of taxis is £20,000 per child. This is absolute insanity, I would respectfully suggest, Mrs Lewell-Buck—it is lovely to see you.

So we have damage to children and the worst of all worlds. Then we look at the prospects of children in the state sector, and we hear that the policy is going to pay for 6,500 teachers. That is about one teacher in every four or five schools—three, it is thought, in the secondary sector. Seriously? When we look at the extra children who will go into the state sector—the tens and tens of thousands—we see that actually there will be more pressure on existing class sizes and the existing teachers, who will therefore be able to dedicate less time per child in their existing school. The prospects of children are damaged not just across the independent sector, but across the whole of the state sector, under this deeply misguided policy.

I touched earlier on the cost. When the policy was announced, it was to raise £1.5 billion, and suddenly it is £1.8 billion. I suggest it will raise the square root of net zero. The reality is that schools will be recovering input costs, including on capital schemes. The reality is that schools will be losing children to the state sector. The reality is that bursaries will have to be slashed. We have heard about some schools giving hundreds of free places. All these things will put extra costs on to the state sector—the state schools—as well as the pressures on county councils’ taxi budgets, which is ludicrous.

From an educational-quality point of view the policy makes no sense, and from a cost point of view it makes no sense. There was an opportunity for the Government to say, “You in the independent sector are doing some things really well, particularly with regard to special educational needs, so we would like the independent sector to help us a bit more—share some of your expertise. Can you give some more places for special educational needs?” That was the opportunity, and I can tell Members that the independent sector would have welcomed with open arms a request to share expertise with local schools. That would have been the right thing to do to improve the prospects for everybody.

The other right thing to do to improve the prospects for everybody was to adopt the Reform UK policy during the general election, which was to say, “If you can afford to pay a bit more, we encourage you to take your children out of the state sector and into the independent sector,” and to relieve the pressure on class sizes by granting tax relief at the basic rate for those who sent their children to independent schools. That would have improved the prospects for everybody.

Those were the opportunities, but instead we have seen deep ideological socialism, with no evidence whatsoever that the policy will make any difference. It is discriminatory, because if it was logical, the Government would be applying VAT on university fees, because of course universities are elitist. Three or four in 10 youngsters go to university, so surely the same policy should be applied to universities.

Will the Minister confirm that if, when the legal cases go all the way up to the European Court of Human Rights—which some people love and some of us do not—the ruling from that court is that the policy is unlawful, the Government will agree with that ruling and apply it? This policy has no logic whatsoever. It is a tragedy for us all, but most importantly it is an absolute tragedy for children.