Back in 2003 Colin Hines, Alan Simpson (then a Labour MP) and I wrote a paper called People's Pensions. Published by the New Economics Foundtion, it argued that pensions should be invested in UK infrastructure projects and that this was possible if UK local authorities, universities, hospitals and others issued bonds for this purpose, with returns being under-written by the government. We predicted nothing less than a savings revolution.
Roll on thirteen years and this was in the Sunday Telegraph this weekend:
Radical pension reforms are being prepared by the Government to help millions of savers get better returns, The Sunday Telegraph has learnt.
Ministers across Whitehall are working on schemes to get pension funds investing in building projects ahead of the Chancellor's Autumn Statement.
Energy projects such as nuclear power stations, railway schemes including HS2 and new broadband roll-outs are most likely to benefit.
It is seen as a “win-win” because savers would get a good return on investments in difficult circumstances while funding a new infrastructure drive announced by Philip Hammond, the Chancellor.
As the Telegraph also noted:
A government source said: “If you've got a long-term infrastructure need why wouldn't we be looking to put sensible money into that?
“Pension funds need to invest their money, they don't want it sitting in cash or government bonds. If you can put it into something that can get them a decent return, that is far better.”
One idea being considered is to give regional mayors powers to create “city bonds”, raising up to £1 billion that would be underwritten by the Treasury.
I agree.
It's just a shame it's taken thirteen years - or a third of many people's working lifetime - for this very obviously desirable option to win favour.
This is how to do it.
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I do hope this goes beyond the rhetoric and that they do it. Unless the existing private pension ‘industry’ sees it as a threat and lobbies against it.
As we know with the current Government – only time will reveal what actually happens.
This report says a return of 4-7%, compared to the 16.5% return for a PFI/PPP scheme. All with the same low risk.
Given you are saying this is not compulsory, why would anyone go for the lower return if you can buy shares in a PFI operator?
Because PFI operators tend to make losses
So where do you get the 16.5% figure from in your report if they make losses?
And if they make losses, are we saying the bonds would be more expensive for taxpayers than PFI to achieve 4-7% returns (assuming our current PFI operator rents/charges are too low to be profitable, as you suggest)?
This is returns required in 2003
And gross returns on investments do not flow to net returns to shareholders
And loans and PFI are not the same thing
Maybe you haven’t realized that
This has been knocking about in serious terms in local government for the last few years. The pensions industry has been diffident on various grounds. They see it as cutting across fiduciary duty. Or they think there are more profitable investment opportunities elsewhere. Or that they can’t risk pensions on local schemes that might go wrong (the theory, I think, being that pensioners get a double whammy of reduced pension and failed local scheme).
Is there anything to concerns of this kind?
The more profitable opportunities elsewhere line is crass: they are begging for bonds
And these would be government under-written
I don’t see the real concern…
So are your 4-7% returns in the report 13 years old too?
Will the gross returns from Peoples Pensions flow through to the pensioner, or just net returns?
I know loans and PFI are not the same, but if one pays higher returns for the same risk, won’t I prefer that?
Of course
It was written 13 years ago……
And you compare net returns not gross ones
Lets hope no-one is stupid enough to use it for nuclear power. Housing and renewable energy are the obvious investments for the future.