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UK Should Boost Capital Markets With Pensions, Says Think Tank

(Bloomberg) -- The “parallel crisis” of hard-pressed pensioners and the UK’s lagging stock market should be addressed with a higher minimum savings rate, a new pensions commission and other retirement reforms, according to a think tank.

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With UK politicians weighing up ways to make retirement funds go further, the New Financial research group said the country should hike minimum pension contributions from 8% of salaries to 12% over the next decade, while launching an independent pensions commission to drive wider changes.

A report published Tuesday, produced with Citigroup Inc. and investment house Abrdn Plc, also called on the UK to account for the funding of public sector pension plans and consolidate thousands of private funds into a few dozen during a “unique window of opportunity for reform.”

“There has been a massive transfer of risk to individuals over the past 20-30 years,” James Bardrick, Citi’s country officer for the UK, said in a media briefing.

Meanwhile, UK pension funds have faced decades of pressure to switch out of domestic equities to assets such as gilts to meet their long-term obligations, in a shift that has been partly blamed for a slowing of capital markets activity in London.

The UK government earlier this year announced an agreement between nine of Britain’s largest pension providers to boost their investment in growth companies, a move it said could unlock £50 billion ($64 billion) if the rest of the industry follows suit.

The regulatory framework for new listings, which the government is also reforming, is “seldom an impediment to potential issuers, it has more to do with the lack of UK domestic money in capital formation,” said James Fleming, Citi’s head of banking, capital markets and advisory for UK and Ireland.

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