In 2003 I co-authored a paper with Colin Hines and Alan Simpson MP called People's Pensions: New Thinking for the 21st Century. It was published by the New Economics Foundation and attracted some attention at the time. In it we argued that less than 15% of the total amount paid into pension funds was used to fund new investment in companies or buildings, whether for commercial or public purpose. The rest was used to fund stock market and other speculation. That speculation was used to fund the City of London, the financial services industry and the excessive salaries paid within that industry which had led to the over heating of the economy of the south east of England.

We argued that this was irrational. To invest 85% of pension funds speculatively rather than to use them to create new assets needed by either the private public sector was absurd, and represented a form of institutional gambling. This we said underpinned the UK's private pension provision, and the crisis within it because it was irrational to place people's long term savings in the hands of those interested in short term market movements. In addition, the process was almost wholly unproductive as most new saving did not go into new investment in real things such as industrial investment but was instead used to purchase existing shares, a process that simply moves money from one financial institution to another, and from which the company that issued the shares does not benefit.

We proposed a radical, but thoroughly prudent alternative that would guarantee pension money would be used to meet the long term needs of society and so earn a return for those in retirement based upon value added for the community as a whole.

The solution we proposed was ignored because, as will always be the case with the current pension system, the inevitable and inexorable monthly flow of funds from pension funds into the equities market guaranteed that following the crash in 2003 the market began to rise again because the supply of new equities is deliberately restricted to ensure that the price of those second-hand shares in issue must rise for a period of several years until a crash can be guaranteed again to correct the obvious and inherent overvaluation that always happens due to the perpetual inflow of these funds into an unsuitable investment media.

Nothing changed as a consequence but our logic was right: the market is falling again at present, and will do for some time to come. But what I was really interested in noting today was a report in the Observer newspaper which said that:

Stock-market historian David Schwartz says : 'It is one of the biggest myths that shares offer generous returns provided your time horizon is a long one.If you look at average annual returns from 1900, stocks come in at about 1 per cent; it is only if you re-invest dividend income that the figure rises to 4 or 5 per cent.'

Staggering, isn't it? The City is supposed to be the biggest wealth generator in the UK these days. We pin our hopes on it. And yet the result that it achieves is at best described as pathetic. So much for the market.

People's Pensions might provide a radical alternative, but if funds were invested as we suggest then there would be schools, hospitals, transport systems, environmental infrastructure, local heat and power schemes, coastal defences and other essential capital projects that this country needs, all paid for out of pension funds that could guarantee a better overall return than the City is clearly capable of delivering.

If you are looking for more than 1% from your pension fund then give People's Pensions a read.