MPs have been accused of showing a “vote of no confidence in UK companies” after the pension scheme for politicians invested far less of its equity portfolio in domestic shares than private sector peers.

The MPs’ pension scheme has less than 3 per cent of its equity portfolio invested in UK shares, despite pressure on the pensions industry from Rachel Reeves to boost investment in the London stock market.

The parliamentary contributory pension fund, which has a total of £855.5 million of assets, had £12.8 million allocated to UK stocks at the end of March, compared with £462.3 million in global equities, its recently published annual report shows.

It compares with an average allocation of 12 per cent of listed UK equities across private sector defined benefit schemes, according to research by the Pensions Policy Institute.

The Labour Party’s general election manifesto made a commitment to increasing investment by pension funds in UK assets.

The chancellor has made pensions reform a central part of the government’s attempts to increase investment and to kick-start lacklustre economic growth. It has included moves to consolidate pensions funds and encourage them to increase allocations in UK assets.

“I have always believed that the parliamentary pension scheme should show leadership in backing Britain, but it has done the opposite for many years,” Baroness Altmann, the former Conservative pensions minister, said.

“But the trustees have chosen to use the money to boost other countries and not our own. If UK parliamentarians are showing such a vote of no confidence in UK companies and markets, one has to wonder how the government expects ordinary investors or overseas institutions to invest in our economy.”

Across other assets, though, the fund had about 22 per cent of assets invested in the UK. This included corporate and government bonds, property and infrastructure investments. An update to the fund’s investment strategy next month is also set to include a further allocation to a new UK investment.

Peel Hunt, the City investment bank, which has been campaigning to reinvigorate UK capital markets, said last year that changing the “paltry” allocation to UK equities in the MPs’ pension fund “would be an excellent way to demonstrate commitment to accelerating UK growth and setting an example for other schemes”.

Peel Hunt’s research found that at its 2017 peak the fund held about £130 million in UK equities which meant that not only had the fund sold down its UK holding to a “very low level” but also that it was “materially underweight” versus the UK’s share of global equities.

Charles Hall, head of research at Peel Hunt, said: “The UK does not have a shortage of capital. The problem is that most of it funds growth in other countries rather than our own … If we want the UK economy to prosper we have to ensure that UK capital backs UK companies. The MPs can take a lead to show how important this is and to drive fundamental change in our pensions.”

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The trustees of the MPs’ scheme include senior cross-party politicians, including Dame Meg Hillier, the Labour chairwoman of the Treasury select committee.

“If governments from both parties want pension funds to invest more in the UK, then it rather makes a mockery of things if the parliamentary pension scheme does the opposite,” Sir Jeremy Hunt, the former Conservative chancellor, told the Financial Times, which first reported the latest figures.

Torsten Bell, the pensions minister, said: “I’m sure all pension schemes, including the parliamentary scheme, will want to look hard at investing in UK assets.

“That is especially the case given this year has seen the FTSE hit record highs and significant momentum behind listings in London.”

The spokesman for the Treasury said: “Our pension reforms will channel more of the nation’s savings into fast-growing businesses and vital infrastructure across the UK, securing over £50 billion for the UK economy by 2030 and boosting retirees’ pension pots by nearly £30,000.”

The government’s reforms are focused on shifting the defined contribution (DC) market towards investing in private assets. In July, 17 of the biggest DC pension providers in the UK voluntarily agreed to invest at least 5 per cent of their assets in UK private markets by 2030.

The Treasury believes that combined with wider reforms in the Pension Schemes Bill it will secure over £50 billion for the UK economy by the end of the decade.