Andy Haldane, 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 £50bn annual tax break should only be available to savers who invest in UK businesses. Speaking at the BCC annual conference in London, Haldane said a "home bias" in retirement savings could close the funding gap that hampers the growth of small- and medium-sized enterprises.
Haldane's Proposal for a Home Bias
Haldane stressed that the current pension tax relief system, which tops up savings at the marginal tax rate, disproportionately benefits higher-rate and additional-rate taxpayers while excluding those on low incomes. He argued that the government should attach conditions to the relief to direct funds into UK companies, avoiding the need for direct taxpayer spending. "Unfettered free markets have not worked. That is a lesson of the last 30 years," Haldane said.
He noted that the British pension system is the only one in the world without a home bias, and that surveys show 70% of households would prefer their savings to be invested in UK firms. The proposal would force retirement schemes to channel funds into UK companies as the price of pension tax relief, leaving investment choices to asset managers and their owners.
Government Measures and Industry Pushback
Chancellor Rachel Reeves has previously suggested forcing pension schemes to devote a proportion of funds to UK investments but pulled back from mandating them in the Pension Schemes Act 2026 after heavy lobbying from City firms. Haldane acknowledged that the government has recognized the need to intervene but said measures like the National Wealth Fund are making only a modest impact. He called for radical tax reforms, stating there are "trillions of pounds available for investment."
Haldane described British business and capital owners as "true thoroughbreds" that need to be brought together. However, he provided no details on how new tax rules would be developed, acknowledging that such changes could take years to agree with the pensions industry.
