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More than 250 British company bosses have urged Rachel Reeves to use her budget to make UK pension schemes channel extra funds into domestic businesses, increasing private investment by as much as £95bn.

In a letter to the chancellor, business leaders said the government must address a crisis in which pension investment in UK-listed companies has fallen from 53% of total equity holdings in 1997 to 4% this year.

The signatories, including major pharmaceutical, financial services and health firms, said that to reverse decades of investment overseas, Labour should tell pension fund managers they must invest at least 25% of their equity holdings in UK shares.

Reeves is expected to announce a string of initiatives to boost investment in her 26 November budget.

The chancellor has already championed the Sterling 20 initiative and Mansion House accord to coordinate backing for local and national infrastructure projects.

Under the Mansion House accord, fund managers including Aviva, Legal & General, and M&G agreed to invest at least 10% of their workplace pension assets in private markets by 2030.

However, the letter, coordinated by the London Stock Exchange Group and signed by the bosses of Revolut, JD Sports and Barclays, calls on Reeves to go further.

It said all defined contribution (DC) pension schemes, used by most employers and holding about £200bn in assets, should be required to change their rules.

“We urge you to be bold,” the authors wrote, adding that the chancellor could make pension fund managers include a minimum 25% allocation to UK assets part of every default fund, forcing savers to opt out if they rejected the plan.

“This policy would set the default level of UK domestic pension investment closer to that of international competitors,” the letter said. “Doing so would provide businesses with access to deeper and more reliable sources of capital in the UK.

“By 2030 overall investment in UK equities by DC pensions would increase by around £76bn from current levels in today’s money (or +230%) and potentially as much as £95bn,” the letter added.

Reeves would easily secure support for the rule change from the public, they said.

“Taking action would be in line with the perceptions of the British public. A recent poll commissioned by New Financial found that the public believes 41% of their pension is invested in UK companies or the UK stock market – 10 times the current level of investment.

“Moreover, 72% support government action to encourage more domestic investment through their pension schemes.”

Individuals could opt out of the plan by requesting their pension savings be diverted from the default fund, the letter said.

The latest investment figures show it may prove a popular option as individual investors seek high returns on their assets.

Investors spent £10.5bn on offshore bonds in the 12 months to the end of June, up from £5.1bn the previous year, according to data reviewed by the Financial Times.

Financial advisers blamed fears of higher capital gains tax for wealthier individuals channelling funds via Ireland, Luxembourg and the Isle of Man into tax-efficient bonds.