Plans to steer pension savings towards UK investments risk damaging public confidence in retirement saving and turning pensions into a tool of industrial policy, leading advisers have warned.
Blick Rothenberg said proposals that would require pension funds to allocate a greater proportion of assets into UK-based investments could undermine a key principle of defined contribution (DC) schemes; that retirement money should be invested according to members’ long-term financial interests.
Tomm Adams, a partner at the firm, said pension schemes work because savers trust providers to invest their money professionally and independently.
“Mandating that a percentage of pension investments must be made into UK assets risks damaging confidence in long-term retirement saving,” he said.
“One of the core principles of defined contribution pensions is that retirement savings should be invested primarily in pension members’ best financial interests, not broader political or industrial policy objectives.”
The warning comes as the Government explores ways to encourage more domestic investment from Britain’s large pension sector, with ministers seeking to unlock billions of pounds of institutional capital to support economic growth, infrastructure and British businesses.
However, critics argue that forcing pension funds to prioritise domestic assets could expose savers to political interference and potentially reduce investment returns if opportunities are selected for national policy reasons rather than financial performance.
Adams said the Government should consider alternative approaches, such as tax incentives designed to encourage voluntary investment into UK assets, rather than creating obligations that could compromise pension outcomes.
“Pension assets should not be a source of capital that governments redirect to support national economic objectives if doing so compromises pension members’ retirement outcomes,” he said.
The adviser also warned that reserve powers allowing greater government influence over pension investment could create a precedent for future administrations to expand their use.
“While these reserve powers may only be a backstop today, they create a precedent that should concern pension savers, employers and trustees alike,” Adams said.
The debate comes against a backdrop of growing concerns over the strength of UK retirement saving. HMRC figures show the value of personal pension contributions increased to £15.91 billion in 2024/25, up almost £3 billion compared with 2022/23.
But the number of pension members making contributions has fallen. Total contributing members dropped to 6.4 million in 2024/25 — around 450,000 fewer than two years earlier.
Blick Rothenberg said the figures suggest a worrying trend: fewer people are saving for retirement, while those who remain are contributing larger amounts.
The firm warned that the UK continues to lag behind many European countries and the OECD average in retirement provision, with state pension levels and automatic enrolment contributions failing to deliver adequate long-term security for many workers.
Adams said the Government’s priority should be rebuilding confidence in saving rather than introducing policies that create uncertainty over how pension money is managed.
“Long-term saving requires consistent messaging,” he said. “Fiscal and investment policy should not confuse the public about whether pensions are primarily for retirement security or wider economic objectives.”
The dispute highlights a broader challenge facing policymakers: how to mobilise Britain’s vast pool of pension capital to support growth without weakening the trust that underpins the retirement system itself.
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