Kay: regulators should use their force for good

The recommendations come from former Institute for Fiscal Studies director John Kay, who has been working on the report for the Department for Business Industry & Skills since September.

In previous statements he has expressed regret pension schemes own less of the stock market and indicated rigorous mark-to-market accounting rules are part of the problem.

And the Kay review, on encouraging long-term investors to do more to promote sustainable growth in the businesses they own, will focus on bringing schemes back into the equity markets, at the expense of traders.

He will argue against greater intervention by the government, Pensions Regulator and Financial Services Authority, and claims they should start to see their roles as helping the industry develop and implement its own solutions.

“The incentives within the existing regulations are all focused on stopping inappropriate behaviour but not encouraging better behaviour,” a source close to the report told PW.

“We don’t want more regulations, but amendments to existing regulation to change the culture at financial regulators and how they engage and enforce the powers they have.”

Kay will also recommend the government works with the institutional investment industry to establish a nationwide forum, where managers and schemes are encouraged to share best practice ideas.

And he will also publish a series of “templates” for “good practice statements” for pension funds and company directors to jointly sign up to, pledging better corporate behaviour and remuneration structures aimed at rewarding longer-term strategies and success.