Ministers signal that pension money could be pushed towards UK assets if voluntary action falls short

UK pension funds are facing growing pressure to invest more money into British companies, infrastructure and growth projects, as ministers look for ways to boost the domestic economy.

Business Secretary Peter Kyle has warned that large pension funds and asset managers may be forced by law to increase their exposure to UK assets if they do not act voluntarily. His comments reflect frustration within government that, despite years of policy changes and industry discussions, British pension capital is still not being directed into the UK economy at the scale ministers want.

Kyle said pension funds should feel a duty to support Britain’s success, arguing that they represent British savers and should not remain detached from the wider economy.

The government’s concern is that UK pension savings are often invested heavily overseas, while foreign pension schemes, including those from Canada and Australia, have been more active in backing British infrastructure and private assets.

The issue is not new. Successive governments have tried to encourage pension schemes to invest more in the UK. Chancellor Rachel Reeves has also pushed the agenda through the Mansion House accord, which was designed to unlock up to £50 billion of pension investment. At least half of that money was expected to be directed towards British assets, including:

• Clean energy projects
• Infrastructure
• Start-up companies
• Private markets
• Long-term growth businesses

However, ministers appear concerned that voluntary commitments may not be enough.

Earlier this year, the government secured back-stop powers that could allow it to mandate investment in UK assets. These powers cannot be used before 2028 and include a test designed to protect savers’ interests. This means any forced investment policy would still need to consider whether it is suitable for pension holders, not just whether it benefits the economy.

For pensions, this could become a major debate. On one side, greater investment in Britain could support economic growth, create jobs and help UK companies scale up. If successful, pension savers may benefit from stronger long-term returns linked to domestic growth.

On the other side, forcing pension funds to invest in certain areas could raise concerns. Pension trustees and asset managers have a duty to act in the best interests of savers. If political pressure leads to investments being chosen for national interest rather than risk-adjusted returns, savers may question whether their retirement pots are being used to support government policy.

For investors, the shift could bring more attention to UK-listed companies, infrastructure funds, renewable energy projects and private equity-style opportunities. It may also encourage wider debate around whether the UK market is undervalued compared with international peers.

Conclusion

The government clearly wants pension funds to play a larger role in rebuilding Britain’s investment base. If managed carefully, this could help unlock capital for UK businesses and infrastructure while giving pension savers access to long-term growth opportunities.

However, the key issue will be balance. Pension money belongs to savers, not the government. Any move to force investment into Britain must protect retirement outcomes first. If the policy succeeds, it could support markets, jobs and pensions. If it goes wrong, it risks lower returns, political interference and a loss of confidence in the pension system.