By Mark McSherry
Veteran Scottish entrepreneur and investor Brian Souter has slammed UK pension funds for the “egregious” risk aversion of their refusal to invest more in UK companies and their shares.
Writing in the 2025 Investment Review of Souter Investments, his family investment office, Souter said the lack of investment by UK pension funds into so-called “risk assets” is “hampering the development of a healthy stock market.”
Souter said the risk aversion of UK pension funds “is bad for everyone concerned.”
The co-founder of Stagecoach said the risk aversion “penalises pensioners and the companies that fund those pensions, as they all miss out on higher returns and therefore have to contribute more to pension pots to achieve the same income.”
The Souter Investments 2025 Investment Review showed the firm has invested in more than 100 unquoted companies since 2006, spanning sectors from infrastructure services and technology to energy and healthcare.
It showed a portfolio value increase of 8% per annum over the 18 years ended March 31, 2025, with more than £450 million invested in its current portfolio.
Explaining the risk appetitite of his investment office, Souter said: “We see the potential upsides as well as the possible pitfalls in a range of opportunities and, most importantly, proactively make decisions to invest if appropriate.
“However, I can’t help thinking that in wider society the risk/reward pendulum has swung too far towards avoiding mistakes, rather than seeking opportunities to back your convictions and take calculated risks in the pursuit of progress and wealth generation.
“This is not a rant about the nanny state or health and safety gone mad – albeit I have been known to give that speech – but a conclusion I have formed based on the evidence I see of a risk averse attitude all around us.
“There are many examples I could give, ranging from bloated overheads in most large organisations where first instincts often prevent business rather than enable it, through to a distinct lack of support for new business creation from all levels of government, particularly in the taxation system.
“One of the most egregious examples is the lack of investment by UK pension funds into so called ‘risk assets’, which essentially means anything outside UK government bonds.
“Whilst this strategy is badged as being safer for pensioners, in my view it is bad for everyone concerned. It penalises pensioners and the companies that fund those pensions, as they all miss out on higher returns and therefore have to contribute more to pension pots to achieve the same income.
“It punishes the UK more widely by hampering the development of a healthy stock market that can support our companies, enabling them to flourish.
“Moreover, this triple whammy doesn’t necessarily make those pensions any safer, Exhibit A being the pensions bailout the Bank of England was forced into after the Truss/Kwarteng mini-budget of September 2022.
“My frustration with the current policy goes back much further and I have been making this point ever since I was president of the Institute of Chartered Accountants in Scotland in 2017.
“I am heartened that the UK government is currently consulting on whether to change the rules for pension funds to encourage a healthier risk appetite.”