Pension Investment in UK Equities

Debate between Torsten Bell and Kit Malthouse

Tuesday 25th November 2025 Westminster Hall

[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.

[Kit Malthouse]

I get the example that the Minister talks about, but I think he misunderstands or perhaps misappreciates how the retail investor thinks. They do not necessarily think, “If I put £1,000 in now, in 20 years’ time it will be worth this.” They think, “If I put £1,000 in now, what is my return going to be next year? What is my running return going to be?” And it will be a percentage return on the dividend. That is why we have a P/E—price-to-earnings—ratio for every share; that is what investors look at. If that is impaired because of taxation and the return is reduced, as it has been over the last few years, they will be less inclined to invest. That, fundamentally, is the pattern that we have seen. The Minister never says this, but in the end, people invest in listed stocks and shares, whether through their pension or otherwise, to make money. They are not doing it for the good of anybody else. They are doing it to make money, and if they are going to make less money, or the perception is that they will make less money, because of Government taxation, they will do less of it. Would he not agree?

[Torsten Bell]

I am not sure that I fully understood, so I am not going to commit to agreeing. Remember that the capital gains on shares in equity ISAs—investment ISAs—receive tax relief in their entirety, so the tax is not the problem in terms of people’s rates of return; the returns would have been very real indeed over, for example, that 25-year period. However, my basic argument is that we need better advice, and that our targeted changes will make it possible for financial firms to offer that.

We are also supporting an industry initiative to rebalance risk warnings to ensure that firms are offering consumers information about investing, not trying to scare them off with over-the-top warnings. Together, these measures will support savers in securing stronger returns over the long term because, as the right hon. Member for North West Hampshire just said, this is about making money for savers—whether in pension savings or elsewhere—putting money into people’s pockets and further strengthening our world-leading capital markets.

I will make one more substantive point and then conclude. This is not just about capital. In the end, the growth agenda, and needing the investment to make it happen, is about actual investment not just financial flows. Financial flows are an enabler of the investment that ultimately matters to the size of the capital stock, the quality of the infrastructure, the quality of the firms, and the amount of capital that workers have to work with. That is, in the end, what matters, and it means firms wanting to grow, which is why I focused slightly more in my remarks on the whole chain of firms’ access to capital.

This is also about being able to get out and actually get things built. I gently remind Members, when I hear them opposing anything getting built, anywhere, by anyone, at any time—I definitely hear the Lib Dem Front Bench opposing—[Interruption.] I am not talking about the hon. Member for Torbay (Steve Darling), but the Lib Dems have never seen a house that they wanted to be built. That is my lived experience of sitting in the Chamber day after day. We need to actually get things built, and as I said, I agree with the hon. Member for Carshalton and Wallington (Bobby Dean) on the pipeline of investment. That is ultimately what we need if we want growth to happen; it cannot just be about changing the flows of existing assets.

I once again thank the right hon. Member for Salisbury for securing today’s debate. A strong pensions industry and thriving capital markets are cornerstones of our capitalism, as I think everybody in this Chamber agrees. We are introducing significant reforms of both the capital markets and the pensions industry, and I am grateful to have had the chance to discuss them this afternoon.

Pension Schemes Bill

Debate between Torsten Bell and Kit Malthouse

2nd reading
Monday 7th July 2025 Commons Chamber

[Kit Malthouse]

That may well be true, but that is a different question. There is a question about financial education and the ability of large numbers of our fellow citizens to understand these financial complexities. We have a large and professional independent financial adviser community, and all pension funds are required to have pension advisers who can speak to members, tell them what is going on and explain the decisions before them. I do think that over the years, such steps have disenfranchised the British people from their financial decisions, yet we hold them responsible for their debts, their mortgages and their future. There is a larger question for us in this House about how much we have subtracted from the autonomy of the British people, and therefore how much blame attaches to us as politicians when their financial circumstances are not what they expect.

[Torsten Bell]

The right hon. Member is giving a lucid speech, as he always does—he speaks very well—but I am failing to understand exactly the point he is making. He is talking about a local government pension scheme, which is guaranteeing him an income in retirement, as if it is a defined-contribution scheme where he is the one at risk from changes in the investment performance. It is local taxpayers with their employer contribution who ultimately bear the risk in the scheme he is talking about. It is our job to make sure that those taxpayers have the best possible chance of not having bad returns, leading to bad outcomes for them. He is not at risk in the way he is talking about.

[Kit Malthouse]

But I have paid into that scheme.

[Torsten Bell]

You have.

[Kit Malthouse]

Yes, I have. I paid contributions through my employment at City Hall, as did my employer. Admittedly, it was a scheme based on a defined benefit, rather than a defined contribution, but that was the deal done with me on a settled contract, saying that this was what I would be provided for from my contribution. Every year, I review my pension benefit forecast. I am consulted by the fund about how it should conduct its affairs. I am asked to turn up to my pensioners’ conference to discuss with trustees how they are looking after my future. The point is that the Government are steaming in with absolutely no consultation with me as a pensioner and I have no right to be represented, although I am uniquely affected, beyond other pension schemes. I consider that to be high-handed and, as the hon. Member for Oldham East and Saddleworth said, to be solving a problem that does not exist.

My third point was also raised by my hon. Friend the Member for Wyre Forest (Mark Garnier): who carries the can? What happens when the Minister tells my private pension scheme or the parliamentary pension scheme that it must invest in, for instance, HS2 and it turns out to be a disaster? What happens when whichever ministerial pet project rises to the top of the priority list for pension allocation—what rough beast, its hour come round at last, slouches towards Whitehall to get its finance—and it all goes horribly wrong? I am sorry to quote Yeats to the Minister, but who will pay when that happens? When there is a deficit in defined-contribution pension funds that have been so directed by the Minister, who will pay for that deficit?

[Torsten Bell]

rose—