Risk aversion is ‘endemic’ in UK, pensions chief warns
The UK is in the grip of “endemic” risk aversion when it comes to investment, a pensions chief executive has warned yesterday.
Tracy Blackwell, chief executive of Pensions Insurance Corporation, said the country needed to embrace the risk of the markets and look to divert capital into more productive areas of the economy.
“How we invest in our pensions and our savings are really a microcosm of the economy and also give us a glimpse of how we can support our futures,” she said.
Speaking at the Centre for Policy Studies (CPS) Margaret Thatcher 2023 conference, at London’s Guildhall, Blackwell asked: “What’s stopping everyone from investing?
“It’s an absolutely legitimate question to ask… the uncomfortable truth as an investor is that the attitude to risk and risk aversion in this country has become endemic. Institutions, regulations and individuals have become incredibly risk averse.”
She added: “The financial crisis left very big scars on this country not just in terms of financial regulation but on people’s psyches and that needs to change.”
The comments come as ministers and City figures push to get more of the country’s pension capital flowing into high growth areas of the economy like start-ups and listed companies.
Equity holdings by pension firms have plummeted over the past 20 years and the government is trying to get cash flowing back into the stock market.
Solvency II rules, which govern the amount of cash big insurance firms have to hold on their books, are set to be loosened in a bid to unlock capital to fund infrastructure projects across the country.
‘Creating value’
Blackwell’s comments came on a panel on the ‘opportunity economy’ where she appeared with City minister Andrew Griffith.
Commenting on Chancellor Jeremy Hunt’s budget, Griffith said: “If you look at something like the abolition of the pension lifetime allowance – that is an absolutely strong Conservative policy.”
Hunt announced Rishi Sunak’s government would abolish the lifetime pension allowance from April 2023, meaning savers would not see pensions funds capped at just over £1m before tax sacrifices kicked in, which ministers argued was inhibiting workforce growth.
He said: “It goes back to intrinsic human nature of creating value for oneself and others and restored the UK’s status as the second largest pool of private pension capital on the planet.
“[There’s] work to be done, but from which good things can flow as we try and get that capital flowing around productive parts of the economy.”
Griffith, economic secretary to the Treasury, and former Sky chief financial officer, said the policy was “also good for young people wanting to get onto the housing ladder”.