By Huw Jones
LONDON (Reuters) - Britain set out plans on Wednesday for trading private company shares, tax-free retail investing, and tougher requirements for pension funds in a bid to funnel more cash into UK companies and bolster the City's global appeal for listings.
Finance minister Jeremy Hunt had already unveiled his "Edinburgh Reforms" in 2022 and the "Mansion House Compact" last year as a post-Brexit London faces added competition from EU centres like Amsterdam.
Hunt set out in his Budget speech on Wednesday further reforms in an effort to dissuade UK companies from following in the footsteps of chip designer Arm with New York listings.
"I want our brilliant technology entrepreneurs not just to start here but to stay here, including when the time comes for a stock market listing," Hunt told parliament.
A new "UK ISA" or Individual Savings Account, would allow individuals to invest 25,000 pounds ($31,785) tax-free in UK equities annually - an addition of 5,000 pounds to the amount allowed under existing ISAs, he said.
"This will be on top of the existing ISA allowances and ensure that British savers can benefit from the growth of the most promising UK businesses as well as supporting them with the capital to help them expand," Hunt said.
Hargreaves Lansdown (LON:HRGV), a share dealing platform, said a British ISA runs the risk of unnecessarily concentrating portfolios and adding further complexity.
"This could be a potential fault line between the FCA and the government, given the FCA’s duty to protect retail investors and to promote an environment where they can achieve good outcomes," added pensions consultants Hymans Robertson.
Tom Minnikin, partner at tax firm Forbes Dawson said Hunt had missed an opportunity to reform the ISA system more broadly.
"Evidence shows that the take-up of stocks and shares ISAs is a lot lower than cash ISAs. Having a single combined ISA system might create a more balanced split and lead to greater overall investment in the UK," he said.
To create opportunities for a "new generation of retail investors", Hunt said he would proceed with a retail sale of the part of the government's remaining minority stake in NatWest (LON:NWG) bank this summer, at the earliest.
The finance ministry launched a public consultation on rules for a new type of trading platform that would allow private, unlisted companies to access a wider range of investors to help them grow.
"This Budget will provide a much-needed shot in the arm for UK capital markets," said Chris Hayward, policy chairman at the City of London, which administers the financial district.
Hunt said The Pensions Regulator and Financial Conduct Authority would get new powers to ensure better value for savers with a defined contribution (DC) pension scheme, with performance judged by overall returns, rather than just fees charged.
DC and local government pension schemes would have to comply with new requirements to disclose publicly their level of international and UK equity investments, piling pressure to invest more in British firms.
Hunt said he would "consider what further action" should be taken if UK schemes don't copy international best practice, as done in Australia, where schemes invest in high growth domestic companies.
($1 = 0.7865 pounds)