British businesses risk being starved of investment as pension funds sell off assets to meet a wave of retirement claims, Goldman Sachs has warned.
Analysts at the Wall Street bank have sounded the alarm over investment levels flatlining in the UK after research found final salary schemes are selling almost as many British stocks as other pension funds are buying. This has meant that UK-listed companies are receiving just £500m in net investment from pension funds each year.
Goldman Sachs said defined benefit (DB) schemes – which pay a fixed income but are largely closed to new savers – are selling £2.5bn of shares per quarter to pay out pensions to retirees.
At the same time, defined contribution (DC) pensions – which do not guarantee a specific income but depend on the performance of financial markets – are buying £3bn of equities over the same period.
However, the vast majority of this net investment is being ploughed into foreign stock markets, with only a quarter being diverted to British stocks.
