In a report released today (30 July) – Diversifying Investment Flows – NCC argued that defined contribution (DC) funds are overinvested in globally-diversified benchmarks, and trustees who diverge from this norm face reputational risk.
A typical DC default fund holds around 80% of its equity allocation outside the UK, according to the report, and indexes like the Nasdaq direct new flows of savers' money to dominant US-listed firms at the expense of domestic infrastructure, housing and energy projects.
The report's analysis showed a UK pension fund invested in the global MSCI World Index will hold more money in Apple (5.5%) than it does in the entire UK economy combined (3.8%).
It also said SpaceX's record-breaking IPO in June 2026 had exacerbated flows of UK pension capital into the stock before the market has had time to determine its pricing.
"Rather than being an issue of globalising UK pension capital, concentration of our pensioners' assets in six or seven US tech stocks creates a systemic risk in and of itself," the report said.
The report links DC funds' concentration of investments in global stock indices to a leaking of capital overseas that causes a lower quality of life for UK pensioners.
NCC policy director Dan Hedley suggested the UK's ‘capital flight' is damaging homegrown innovation.
In response, the think tank has called for the new government to enact measures amounting to a redesign of the UK investment system. It said this would restore "a transmission vehicle investing savers' capital into long-term, productive investment, into things that improve the places they live and retire in, whilst producing high-quality returns".
NCC's primary policy recommendation is the introduction of taxes to discourage passive indexing, arguing that "an organised tax architecture is the only lever strong enough to provide" this incentive.
This could include a 10% DC exit tax on accumulated gains for funds that do not maintain a 30% allocation to UK productive assets, paired with dividend tax relief for funds that hold at least 10% in UK regional productive assets.
However, the report also gave disclosure and mandate design as other levers necessary to address the leaking of capital.
NCC said a disclosure regime at fund and scheme level would make it easier to see whether returns were translating to productive impacts for members and the UK economy. It suggests a rethink of mandates requiring default funds to include a productive-investment objective.
NCC director Ashok Gupta, who previously led Pensions UK's defined benefit (DB) taskforce, which sought to turn the pensions sector into "a powerful engine of growth to the economy", said: "UK savers want to see their money improving the areas they will most likely retire in, but this just isn't happening. If the new administration wants to get to grips with regional development and get our economy growing again, it must address both US-dominated overseas flows and unproductive secondary trading."
The report's publication comes after Standard Life chair Nicholas Lyons called this week to restrict the tax-free wrapper on stocks and shares ISAs to investments in UK assets.
Lyons has argued in 2025 in favour of disclosure requirements to ‘name and shame' pension funds not investing in Britain.
The Mansion House Accord in May 2025 saw 17 pension providers express their intent to invest at least 10% of their DC default funds in private markets by 2030, with at least 5% allocated to UK assets.
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