Sometimes you have to go back to basics. What is your pension for? Is it a) to fund your retirement or b) to prop up the UK stock market and, with it, the City of London?

Bad luck if you answered a) because plenty of people seem to have different ideas nowadays. And not least Rachel Reeves, who still hasn’t dropped her threat to “mandate” UK pension funds to invest wherever she sees fit. Not only her. Now along has come the New Financial think tank, founded and led by William Wright, with a less draconian but still wrongheaded plan.

His starting point is uncontentious enough: “Vibrant public equity markets are crucial for the health of the UK economy.” And, right now, “vibrant” is not a word you’d attach to the London market. A key reason for that? The long-standing issue that investment by UK defined contribution pension funds in UK equities has fallen to just 4.9 per cent of total assets versus a global domestic average of 13 per cent-plus. As a proportion of total equity allocation, only 8.9 per cent now goes into UK shares versus 40 per cent a decade ago.

• Force pension funds to invest far more in UK stocks, ministers urged

So, here’s New Financial’s fix: why not “require all DC default funds to adopt a UK weighted allocation”, forcing them to lift that 8.9 per cent to “20 to 25 per cent” of their total equity holdings? Yes, individuals would have an “opt out”. But seeing that, according to the Pensions Policy Institute, 96 per cent of DC fund members stay in the default investment strategy, it looks like mandation by the back door.

Still, the plan could, on the think tank’s maths, add £95 billion by 2030 to the £33 billion that UK DC funds today invest in UK equities, assuming asset growth. And, hey presto, back would roar a UK market full of vibrancy. Simple, no?

Naturally, the plan has gone down a treat, too, with all the likely suspects. Dame Julia Hoggett, the London Stock Exchange boss, is on the press release banging on about how “the need to stimulate growth is profound”, adding: “Denying the economy of investment is tantamount to deliberately starving the flame of economic growth of the oxygen it needs to spark to life.” Do people really talk like that? As for the Schroders boss Richard Oldfield, he reckons the plan “could make a meaningful difference”. Yes, to his profits, perhaps.

And there’s the problem. New Financial is funded by asset managers, insurers, banks, the stock exchange and others who stand to benefit from its plan — the likes of the City of London Corporation. Ask Wright whether he’s not just banging the drum for them and he gets a bit prickly, saying that would be “a hugely simplistic way of looking at things” and also wrong.

Even so, what’s in it for the pensioners? In fairness to New Financial, its report is thorough, so it does point out that over the past ten years, UK equities have delivered a mere 6.2 per cent annualised return — just one third of that, in dollar terms, from US equities. So, on present form, the plan is an invitation to lose money. Wright has an answer for that too: a survey of 1,055 adults conducted for New Financial by H/Advisors. It found that “nearly two thirds of people said their pension should invest more in the UK stock market even if returns might be lower”. Who did they interview? Complete idiots?

Yes, pensions attract tax relief — £49 billion in 2023. And Wright says the “quid pro quo” for that should be extra UK investment. But the relief is to incentivise investment generally, so people do not become a burden on the state in retirement. And, with that goal in mind, pension trustees have a fiduciary duty to try to maximise returns, not bolster the UK stock market or the City. The benefits are meant to be for you.

Peters’ friends

Anyway, maybe if we’d sacrificed a bit more of our pensions to UK equities, we’d have hung on to Petershill Partners. What that? The investment vehicle backed by Goldman Sachs, or at least funds it manages. Having floated at 350p a share in 2021, with a market value of £4 billion, it’s cancelling its listing, fed up with UK stock market life (report, page 37).

Petershill always looked a curious beast. Almost 80 per cent of the group is held by private funds managed by Goldman Sachs with investments in two dozen private equity and hedge funds. The idea was to give the one fifth free float the sort of exposure they couldn’t easily get to them. Yet, wouldn’t Goldman have kept the business for itself if the investments had been that good? And Petershill was too opaque. It never disclosed the size of its stakes in the firms or at what value it held them. And, of the 24, the only one most people had heard of was Chelsea FC-owner Clearlake.

• Goldman Sachs to delist investment fund from London market

The shares drifted down, trading since January 2024 at an average 37 per cent discount to reported book value, with liquidity drying up. And, despite asset sales, tender offers and buybacks, the chairman Naguib Kheraj says he saw no “catalyst” to fix that — not least with the market in a funk over private equity’s struggles to sell portfolio companies.

The upshot? A $921 million plan to buy out Petershill’s minorities at 309p a share: a tiny profit for those in since the float, after accounting for cash returns, and enough to lift the shares 34 per cent to 310p. Still, none of this will alter one old adage: don’t buy when Goldman is selling.

Yielding to no one

Place your bets. What pushed up UK gilt yields? Was it the robust US economic figures, which reduced the chance of a Fed rate cut, nudged up US bond yields and dragged others higher in its wake? Or was it Andy Burnham, with his Corbynesque views that we should not be “in hock to the bond markets”? Surely investors aren’t daft enough to be already punting on him becoming PM.