The Daily Mail seems intent on starting a row about the new national pension scheme that Labour planned and which the ConDems have endorsed.
I do have revisions about the timing of the launch of this scheme. Eight percent of pay (admittedly not all pay in the UK — but a sum vastly bigger than the £3.2 billion the Mail claims to be involved, I suspect) is a significant sum to force into pensions at this moment. That’s not because I have a problem with pensions at all. I don’t. But these pensions will, I have no doubt, be invested in the same way as conventional pensions — which means the vast majority will end up being speculated on shares.
Over the last decade after pension fund charges saving in this way has paid negative returns.
More important, as I explained in ‘Making Pensions Work’, this is not investment activity. It is savings activity. This heightens the risk of recession by draining money out of the r4eal economy at this time and it does not create a single new job because buying shares does not create worth — it just transfers it, or creates the false impression of wealth in the seemingly inevitable boom and bust cycle of the stock exchange.
Unless these pension fund monies are to be directed to the creation of real jobs in the real economy for the benefit of ordinary people this new pension fund will just be another example of the capture of the wealth of ordinary people for the benefit of the City. That’s what pensions have been to date. We cannot make the same mistake again.
But at least NEST — the agency responsible are listening — I am meeting them soon, at their request.
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“Over the last decade after pension fund charges saving in this way has paid negative returns.”
This is a sweeping generality that is not true for all equity funds. Some have indeed lost, but others have gained handsomely over the same period. It is misleading for you to tar them all with the same brush.
@Jon Barker
Oh come on. NEST is a universal scheme. I’m more than allowed in that case to look at generalities
And the generality is that equity investment has been a lousy choice for a long time – and pension charges usually make it a dire one
“And the generality is that equity investment has been a lousy choice for a long time …”
But not forever. The past decade has been poor for equities, but this is not true of every decade. Statistics show that equities have outperformed all other asset classes over multiple decades.
Given that, why are you certain that equities will under-perform for the next one, two, three, and four decades?
You should also clarify your use of the word “speculated”. There is a definite difference between speculation and investing, but you appear intent on blurring the distinction.
@Jon Barker
Equities are seriously over valued now
The real economy is dire and likely to be stagnant at best
Companies have no investment plans
The market is irrationally over valued as pensions have nowhere else to put cash – or so they think
And a crash is likely
That remains my reasonable, rational, forecast
And as for the difference between speculation (what, unfortunately pension funds do) and investment is fundamental – and you clearly have no idea what it is
Learn it – fast
“And as for the difference between speculation (what, unfortunately pension funds do) and investment is fundamental – and you clearly have no idea what it is
Learn it – fast”
Oh dear, Richard. You really are a piece of work, aren’t you?
@Jon Barker
Contribute to debate please
Drop the ad hominems
Now – tell me why I get investment wrong
Or can’t you?
But your idea of debate seems to be putting down every comment that disagrees with you in an offhand and belittling manner. It can hardly be a surprise to you if folk respond in kind.
I could offer you a lot of arguments, not just from me but from respected mainstream economists, showing how investment differs from speculation, but you would simply dismiss them in your usual fashion. Hence, no point.
@Jon Barker
Oh dear – you sensitive little soul
Try this:
“Using newly deposited pension funds to buy Marks & Spencer shares already in issue is not making an investment, it is saving”
That seems to me to be nonsense, although maybe it all boils down to personal interpretation.
“Saving” is usually thought of as a low-risk activity, which you would generally not associate with the purchase of an equity.
@Greg
You reveal how little you know
Saving is completely unrelated to risk – saving is a passive action seeking a future return
It may or may not have risk attached to it – but the saver is separated from the use of the funds
Investment is a positive action that engages funds – whether supplied by savers or credit does not matter – in economic activity resulting in engagement in the real economy
They are fundamentally different
And because of credit also unrelated
@ Richard, I think perhaps you are revealing a fair bit of arrogance here, and maybe a detachment from what is reality.
Your definitions might be true according to an accountancy text book, but to the general population (and to people actualy involved in managing money) purchasing equity in M&S is not saving. Most people would accept that saving does not come with the risk of losing capital, whilst investment does.
But Greg, you are always berating the Landsbanki Depositors Action Group for saying they were investing by depositing when clearly they were saving.
@Greg
Arrogance, or ignorance? Which is better?
Finance professionals who do not understand what they are doing are very dangerous
So, for example, it was assume that putting cash in a bank did not carry risk of loss – it sure did in September 2008
Your logic is wrong
Just as your use of language is
Get it right as we might all be better off