The UK’s pension system suffers from a lack of long-term risk capital and retirement security due to narrow, short-sighted decisions, according to a report by the Tony Blair Institute for Global Change. Focusing on making pension promises too safe made them unaffordable and prevented new businesses from accessing risk-taking capital, while defined contribution plans now impose too much risk for individuals. From 2001 to 2022, UK private sector pension funds holdings of UK equities fell to only 4% of the portfolio, while the holdings of fixed-income securities increased to approximately 60%. The report suggests creating a UK pension “superfund” that allows for the consolidation of defined benefit pension funds and the option for those in defined contribution schemes to shift into collective superfunds. It would help spread risk across individuals and generations, generate greater economies of scale, and actively manage assets, unlike pension consultants and insurance companies. Their aim is to think big, act boldly, and exit the current pension cul-de-sac.
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