As the FT has noted this morning:
Pension funds are resisting a UK government push to invest up to £50bn in projects and business to support economic growth, saying the country is not an attractive enough destination for more of their capital.
Executives from the £1.3tn sector attending a conference in Manchester on Wednesday said funds looking to support the government's growth agenda amid high pressure on public finances were encountering myriad barriers.
I am not especially surprised by this report. There are three reasons.
First, Jeremy Hunt wants funds to invest in companies. Early-stage companies are not suitable pension fund investments, in most cases
Second, there is no guarantee: that is absurd when what the government wants funds to do is provide substitute, off-balance-sheet, funding for the government.
Third, Jeremy Hunt was a typical cowardly politician when asking funds to invest. He asked, feebly. He did not require action. There will be none as a result.
As I have long argued, pension funds could be an ideal source of funding for the green transition that we need, but there are conditions attached to that suggestion.
First, the government has to create the investment opportunities.
Second, the opportunity has to have an income stream attached to it (which is not hard: it's either a rent, or a revenue e.g. from energy, or a lease from a government department).
Third, the opportunity has to be wrapped up in a bond with a government guarantee attached to it, which then reduces the cost.
Fourth, there has to be compulsion. If tax relief on contributions to funds was linked to compulsorily investing 25% of all new funds in new green activity in the UK economy most of that money would flow into government-related activity.
Jeremy Hunt has just got to have the nouse to realise that the purpose of being in government is to require action, and not just to ask nicely. He is not alone though. Labour will also need to do this.
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By inference other countries are more attractive for capital than the UK.
The FT doesn’t ask ‘which other countries’, but it would be worth finding out and figuring out what those places are doing right.
That is a very nuanced claim by you, which I would suggest is wrong
My own Pension Fund seems to be investing in things like Renewable Energy so it is happening but it’s the Local Government Pension Scheme so it is probably able to do so unlike a money purchase fund
Obviously the remaining DB pension funds are currently in the best position to invest in renewables because the whole fund has a single management, and one which holds the sort of large sums which allow investment in individual projects.
At the moment the DC pension funds I have come across have – in theory at least – identifiable “pots” for individual savers that are invested from a menu of funds, even if the majority accept the default offer. However if Richard’s suggestion of a requirement for 25% of investment to be in “green” projects I am sure the unit trust industry would quickly develop compliant funds. It would need there to be traded bonds of “pension investment grade” that could be included within the funds, but that is exactly what RIchard proposes.
Do no politicians read this blog?
They do
Having the courage to act is a different issue
“Jeremy Hunt has just got to have the nouse to realise that the purpose of being in government is to require action, and not just to ask nicely. He is not alone though. Labour will also need to do this.”
Once again it’s the monetarist mentality dogging the country across the political spectrum. Again until the British people get to grips with the economically negative aspects of this and realise it’s also an ideology for corruption (greed) the country will never climb out of the mess it’s got itself in.
Monetarism the UK excuse for “inaction politicians” unless greed is being served!
https://jamiedriscoll.co.uk/news/the-answer-to-our-economic-problems-is-generating-more-wealth-here/
Jamie Driscoll on pension funds. He’s already doing it.
Good for him
The illusion Jeremy Hunt maintains is the neoliberal obsession; he wants pension funds as a ‘market’ to fix a Government problem. As you point out, they are in the guarantee business; they don’t do, or at least shouldn’t do risk investment. There has to be security. Having said that, what the pension industry was doing with LDI’s heaven knows; but then Hunt presumably assumes the pension industry is as foolish and ideological as he is.
I believe that according to Boswell’s Life, Dr Johnson asserted that “Courage is reckoned the greatest of all virtues; because, unless a man has that virtue, he has no security for preserving any other.” In other words, you can have the greatest ideas and principles in the world, but if you don’t have the courage to act on them, they are useless.