Baroness Altmann said: “It’s an outrage that a major pension fund, especially one underpinned to some degree by the Government and funded to a significant degree by taxpayer money, is not supporting the British economy.
“If you don’t have domestic sources of long-term funding supporting your own economy, then however much you believe you’re going to get a better return from investing overseas, you are impoverishing your own domestic base and therefore your members are going to have a poorer retirement because they’ll be living in a poorer country.”
Nick Delfas, an analyst at Redburn, said BT’s paltry domestic holdings “jumped out” and urged policymakers to take note.
Baroness Altmann called on MPs to do more to encourage pension funds to invest in Britain, saying it was crucial to economic growth.
She added: “I just think we’ve lost the plot a little bit on what a pension fund is meant to achieve… it’s about time we helped pension funds understand that there is a responsibility that goes along with getting tax relief.”
A spokesman said the BT pension scheme was reducing its exposure to equities as part of a de-risking strategy. The scheme is highly mature, with an average member age of 68.
The scheme’s overseas equities have also suffered heavy losses, tumbling 75pc to £1.7bn.
Nevertheless, the small proportion of UK stocks held by the fund highlights the FTSE 100’s waning status among global rivals. Last year, Paris leapfrogged London to steal the crown as Europe’s largest stock market.
John Ralfe, a pensions expert, said: “The truth is, the UK is a small stock market.”
The 66pc reduction in UK stocks held by BT’s retirement fund is understood to be partly linked to the chaos in financial markets that struck last September.
A sharp fall in government bond values in the aftermath of Liz Truss’s mini-budget triggered margin calls on products called liability driven investments (LDI), which are popular with pension funds.
The Bank of England was forced to make a dramatic £65bn intervention to mitigate the crisis, which forced many pension funds to rapidly sell assets to meet margin calls.
