Andy Haldane, the president of the British Chambers of Commerce and former Bank of England chief economist, has called for radical reforms to pension tax relief, arguing that the more than £50bn in annual relief should only be offered to savers who invest in British businesses.
Speaking at the BCC annual conference in London, Haldane proposed a “home bias” in retirement savings to direct funds into UK companies, particularly small- and medium-sized enterprises (SMEs), which face a funding gap that hampers their growth.
Radical measures needed for startup capital
Haldane, who has been mentioned as an adviser to Labour MP Andy Burnham, said radical measures are necessary to provide startups with the capital they need. He argued that unfettered free markets have not worked over the past 30 years, and the government must intervene more aggressively.
While ministers have recognised the need for intervention, Haldane said current measures—such as the National Wealth Fund—are having only a modest impact. He stressed that “trillions of pounds are available for investment” and that the tax system is the perfect vehicle to channel funds into British businesses.
Pension system lacks home bias
Haldane noted that the UK pension system is unique globally in lacking a home bias. He proposed attaching conditions to pension tax relief to force retirement schemes to invest in UK companies, avoiding the need for direct taxpayer funding.
“Is there a third way, something that shifts the balance of incentives towards British businesses, while leaving those choices in the hands of asset managers and their owners?” Haldane asked. “As luck would have it we do. It’s our taxation system, which is the perfect vehicle.”
He highlighted that the government provides over £50bn in pension tax relief and more than £10bn in ISA tax relief, without any rules requiring investment in UK firms. Surveys show 70% of households would prefer their savings to be invested in UK companies, he added.
City opposition and government caution
Chancellor Rachel Reeves had considered forcing pension schemes to allocate a portion of funds to UK investments but pulled back from mandating it in the Pension Schemes Act 2026 after strong lobbying from City firms against a “mandation clause.”
Haldane described British business and capital owners as “true thoroughbreds” that need to be brought together. He did not provide details on how new tax rules would be developed, which could take years to negotiate with the pensions industry.
