Pension and ISA reform can reverse London’s stock market malaise
London must back ambition to reverse our stock market malaise, but pension and ISA reform may be the first step, writes Alastair King
The UK remains a global hub for innovation. But too often, our most promising companies are choosing to scale abroad. That is why later this month, I will be opening the doors of Mansion House to some of the UK’s brightest companies. They will pitch directly to major domestic investors, among them the major banks and the London Stock Exchange Group, to help secure the capital they need to grow and stay in Britain.
Wise is heading to New York. Cobalt Holdings has shelved its London IPO. Shein is eyeing Hong Kong. These are not just listings lost, they are opportunities missed.
If we want to build a high-growth, high-opportunity economy – creating high-quality jobs – we need capital markets that back ambition. That means bold reform, stronger investment and renewed confidence in Britain. Here are three vital reforms that are now more urgent than ever.
How to turn the stock market malaise around
The Mansion House Accord is a turning point: 17 of the UK’s largest defined contribution (DC) pension schemes have committed to invest 10 per cent of their default funds into private markets, with half of that capital flowing into the UK. That is over £50bn invested into the United Kingdom by 2030, backing infrastructure, clean energy and the scale-ups of tomorrow.
This is the private sector putting its money where its mouth is. It is not just about returns, it is about resilience. It is about turning passive pension pots into humming engines of national renewal.
Pensions do not operate in a vacuum. That is why I am championing the Employers’ Pension Pledge, a new initiative encouraging UK employers to prioritise value for money, not just cost, when choosing pension providers. Currently, employers often pick the cheapest pension scheme for their employees. Pension scheme defaults allocating more to growth companies and infrastructure will cost a little more, but could lead to better returns, even after costs, over the longer term. We all know that cheapest is not necessarily best, and this should apply to our pensions as well.
I am speaking with chief executives and chairs of the biggest companies across the UK to encourage their pension funds to back infrastructure projects and AIM-listed firms to drive growth and innovation across the country.
Major UK employers have the scale to shape the investment landscape. The questions they ask influence where pension funds invest. To get greater capital flowing into UK firms, employers must be part of the solution.
Pensions and ISAs are ripe for reform
The Pledge dovetails neatly with ongoing work at the Financial Conduct Authority and The Pensions Regulator, and it is about aligning pension outcomes with national priorities.
Importantly this is also about fairness. A UK saver can expect to retire with a pension pot 30–40 per cent smaller than a counterpart in Australia, Canada or the Netherlands. That is not acceptable. We owe it to those who save responsibly to ensure their money is working as hard as they do.
Next, we need to rethink how we treat Individual Savings Accounts (ISAs). Right now, there is an enormous cash pile sitting idle in ISAs, capital that could be working harder for both savers and the country in productive assets.
We must address the structural barriers holding back our public markets. It cannot be logically correct that, as it stands, we do not pay tax on purchases of shares in international vehicle manufacturers such as Tesla, but we are taxed for investing in a British brand like Aston Martin. This would incentivise support for UK markets and help channel capital into the sectors that need it most.
Cutting the 0.5 per cent stamp duty on UK share purchases would boost liquidity and send a clear signal to investors. Revitalising platforms like AIM, which support growth companies, will ensure that firms can scale in Britain, not just start here.
We have the capital. We have the institutions. And now, with the Accord and the Pledge, we have both the will and the means.
Let us stop waiting for confidence to arrive from elsewhere. Let us build it here, with our own capital, our own conviction and the certainty of our own ambition.
Alastair King is the Lord Mayor of the City of London