Shareholder returns that feed into UK workers’ pensions “disproportionately benefit a wealthy minority”, according to a report put together by the TUC, think tank Common Wealth and the High Pay Centre.
The study found that almost one in three UK shares was held by a UK pension fund in 1990 yet this had declined to 2.4% by 2018 so listed companies paying out in dividends and buybacks had a much smaller impact on pension wealth.
On top of this, less than half of full-time private sector employees with a gross weekly income of £100 to £199 belong to a pension scheme, the report said, so those returns to shareholders that do accrue to pension funds disproportionately benefit a small number of households with high levels of pension wealth.
TUC general secretary Frances O’Grady claimed that “working people deserve a fair share of the wealth they create” and described a growing gap between profits for shareholders and investment in wages and pensions for average workers.
The report, Do dividends pay our pensions? calls for a number of actions to close the gap between the “working people who create the wealth” and share-owners, who it claims are too focused on short-term payouts.
These include creating a seat on the board for a directly elected worker; making reporting requirements stronger for publicly listed companies and investment firms; stronger collective bargaining rights for workers; and rewriting directors’ duties to remove the current requirement to prioritise the interests of shareholders over other stakeholders.
The report’s authors found that just 6% of UK listed shares are now owned by UK workers. More than three-quarters of workers would back a legal obligation for businesses to give as much weight to the interests of staff as to shareholders.
The richest 20% of UK households by income own 49% of pension wealth in the UK, according to the analysis.
Luke Hildyard, director of the High Pay Centre, said the link between the most successful businesses in the UK and “ordinary savers” was becoming weaker and weaker.
“Our research shows that a tiny and shrinking proportion of corporate Britain’s vast pay-outs to shareholders reaches ordinary savers, while workers are denied a voice in the running of the companies they help to succeed,” he said.
“We need economic reforms to make big business work for the benefit of everybody, not just a small number of wealthy executives and investors.”