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The Financial Conduct Authorityโs defined benefit pension scheme has just 4 per cent of its equity portfolio invested in UK stocks, far lower than its private sector peers, despite urging others to invest more at home.
The ยฃ556.9mn pension scheme, which is closed to new members, is mostly invested in debt securities but only ยฃ1.8mn of its ยฃ45mn listed equity portfolio is allocated to the UK, according to its annual report.
That compares with an average allocation of about 25 per cent across private sector DB funds, according to research by the Pensions Policy Institute last year. Most private sector DB funds are also closed to new members.
The low allocation of the regulatorโs pension scheme to UK stocks comes as the government and the FCA itself have been trying to encourage pension fund managers to invest more in their domestic market.
โThis is a clear example of do as I say rather than I do,โ said Charles Hall, head of research at Peel Hunt.
The financial watchdog also has a ยฃ1.57bn defined contribution scheme for its staff, where UK equity exposure is about 3 per cent of total assets. The UK stock market makes up about 3.5 per cent of global equities.
Earlier this year, FCA boss Nikhil Rathi told the Treasury committee: โAustralian and Canadian pension funds seem to find investments in the UK more attractive than our own pension funds, and their pensioners are getting the benefits of those returns.โ
โWe have to ask ourselves if that is really a sensible, long-term solution for our society,โ he added.
The regulatorโs scheme is run by a separate legal entity. Most of its trustees, who are advised by pensions consultants, are FCA employees.
The FCA said: โThe trustees of the FCA Pension Plan are independent of the FCA. The trustees aim to maximise returns whilst managing and maintaining investment risk at an appropriate level.โ
Successive UK governments have encouraged British pension schemes to invest more domestically to help boost growth. The FCA is also working to boost Britainโs ailing stock market, including by encouraging demand.
The FCAโs approach to domestic stocks is similar to that of the DB scheme for MPs, which has 2.5 per cent of its equity portfolio invested in UK stocks, according to its annual report.
Pensions minister Torsten Bell said in May that the low allocation to UK assets โ across all asset classes โ by pension schemes was โnot in the interest of the country in the longer termโ and the end goal was โwell-functioning capital markets, both public and privateโ.
