Renowned City stock-picker Richard Buxton has called for a shake-up of the £2.5tn pensions market to “breathe new life” into the UK’s stock market and put it on a level playing field with other major financial centres.
Buxton retired from Jupiter Asset Management at the end of August, bringing the curtain down on an almost 40-year career that saw him become one of the UK’s most prominent investors.
“There is no equity-oriented savings pool left in the UK for the next generation of fund managers,” Buxton wrote in an exclusive article for Financial News (see page 8).
“The US has one. Australia and Canada — thanks to compulsory savings at source — have investment pools far bigger than their domestic equity markets can absorb, so they are huge investors globally in equities and infrastructure.”
The veteran fund manager also lamented the “swathes of long-term savings” that have abandoned listed companies in favour of private equity funds, despite often paying higher fees.
Buxton, who began his City career at Brown Shipley in the 1980s, called for bold pension reforms in the UK, such as merging existing defined benefit and defined contribution schemes to “create larger funds that can take more risk”.
Chancellor Jeremy Hunt announced in his July Mansion House speech proposals to enable defined benefit schemes to merge. The aim would be to enable them to build scale and allow them to make riskier investment calls.
The Chancellor also revealed that some of the UK’s largest defined contribution pension schemes have agreed to allocate 5% of the assets in their default funds to unlisted equities by 2030; currently, they allocate less than 1% .
However, Buxton said the UK needs to go further. He proposed introducing “compulsory savings at source” and repealing “regulation that forces savers into bonds through an erroneous definition of risk”.
Buxton’s comments come as the UK stock market continues to lose out to some of its largest international rivals.
A flurry of UK-based companies — including Arm Holdings, Flutter and CRH — have recently shunned the London market to pursue IPOs in New York.
“The UK is blessed with huge entrepreneurial spirit. Net new business formation is consistently strong. Wonderful innovation emerges from our universities,” said Buxton.
“But it struggles to get UK-based investment, as we have eviscerated our long-term equity savings pool in favour of trillions held in bonds.
“It is critical for the UK economy, as well as the provision of adequate pensions for our ageing society, that we breathe new life into our stock market.”
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