The proposals, which were unveiled by chancellor Jeremy Hunt in March immediately prior to the Spring Budget, would also force DC schemes to disclose their costs and net investment returns and bar poorly performing DC schemes from new business.

The proposals are subject to consultation by the Financial Conduct Authority (FCA) and intend to build on the government’s Mansion House Compact, in which nine of the largest DC pension providers agreed to allocate 5% of their assets under management in their default funds to unlisted equities by 2030.

In its response to the government’s proposals, the SPP said there was a “broad consensus” among its members that the proposals would have the opposite effect.

The society said providers already disclosed their level of UK investments and have done so for several years – adding that funds with higher UK equity allocations have “typically underperformed” those with “little or no exposure” to the UK equity market in the past.

The SPP noted while past performance “is no guide to the future”, it said compelling DC schemes to disclose their investments in British businesses may contradict the government’s emphasis on its value for money framework for DC schemes as well as its proposed rules for schemes needing to compare investment performance data against two schemes with assets under management in excess of £10bn.

Additionally, the SPP said the reporting burden described under the proposals was “disproportionate” due to many DC schemes being invested in unit funds where the underlying investments may be changing at a rapid rate. 

The society added that the proportion of a DC member’s pot which is held in UK equities will also vary from member to member as they get older and different investment drivers “come into play”.

SPP DC committee member Amanda Small said: “The SPP appreciates policymakers’ ambition to unlock capital for UK companies. However, the government must be careful that a new reporting obligation like this does not inadvertently channel DC schemes’ investments into UK-centric asset classes that currently neither reflect a robust investment case or meet trustees’ requirements for diversification, sufficient risk-adjusted returns, and avoidance of concentration risk.

“This additional disclosure obligation will not drive the right behaviours and achieve trustees’ overarching objective, which is to provide good outcomes for members. If the government wants to encourage greater investment in UK companies, then these companies need to offer better risk-adjusted investment returns. Ultimately this is the key driver of trustees’ investment decisions.”