Bank of England governor Andrew Bailey has warned against forcing pension funds to invest in UK-based companies or other British assets.
The policy, which was floated by previous Chancellor Jeremy Hunt, is said to be under consideration in some form by his Labuor successor Rachel Reeves.
Bailey said he would not “for a moment” support the idea of forcibly making pension funds back British companies.
Speaking at the Institute of International Finance, Bailey said: ”I don’t for a moment support a compulsory allocation of pension money to UK assets,” though he conceded there was a need to address “relatively weak investment” in the UK.
One option reportedly being looked at is to consolidate ‘stranded’ money in small direct contribution schemes into much larger pools of pension money that will invest in the UK.
Resistance from the pension industry, however, has been fierce.
Jason Windsor, abrdn’s chief executive, said: “The UK needs to make itself an attractive place for investment without punitive tax or without unnecessary regulation.
“And that’s so businesses can prosper and grow in the UK.”
The International Monetary Fund (IMF) also said forcing more pension savings into riskier assets poses a threat to the UK’s financial systems.