Who benefits from returns to shareholders?

New research from HPC, the TUC and Common Wealth highlights how little most people gain from dividends and share buybacks.

  • UK pension funds account for just 6% of shareholdings in UK companies
  • The richest 1% of households own 39% of share-based wealth
  • Findings highlight weak and diminishing link between fortunes of Britain’s biggest companies and the prosperity of wider society

Our new report with the TUC and Commonwealth shows that UK workers get comparatively little benefit from share dividends – despite common claims that they do.

The report Do dividends pay our pensions? finds that the proportion of UK shares directly held by UK pension funds fell from almost one in three in 1990 to less than one in 25 by 2018 – a decline of over 90%.

Over this period, ownership of UK public companies shifted from UK pension funds to foreign owners and investors whose identities are often obscured by lax reporting rules.

The authors say that workers in UK listed firms deserve a clearer understanding of who now benefits from their labour, and how much is captured by a wealthy minority.

Pension funds and share ownership

For nearly 20 years from 1981 to 1998, UK pension funds accounted for over a quarter of the total market value of UK listed shares. However, this steadily declined to just under 13% before the financial crisis in 2008. It then fell sharply and now stands at around 2.4% for direct ownership, and 6% with indirect ownership included.

The remaining shareholder returns to pension funds disproportionately benefit a wealthy minority. The richest 20% of UK households by income own 49% of pension wealth in the UK.

Despite Margaret Thatcher’s aspiration of a nation of share-owning households, individual private investors have declined from over 50% of UK share value in the mid-1960s to less than 14% today.

Within individual share ownership, there is significant inequality. For UK households, the richest 1% own 39% of total share-based wealth, more than the poorest 90% combined.

Most UK listed shares are now accounted for by foreign investors – a tenfold increase from 5.6% of share ownership in the mid-1970s to 55% today.

The change in ownership not only affects who benefits from company profits, it also has implications for the stewardship of boardrooms by shareowners and prioritisation in decision-making.