This FT headline is the best response I have seen to Rachel Reeves' demand that UK pensions be reformed to support British companies:
For once I find myself in agreement with Chris Giles, and hardly need to add anything else.
However, I also noted this headline:
The story here is:
UK retail investors have been piling into gilts and other fixed-income products in search of higher returns and lower risk despite a sharp sell-off, according to investment platform AJ Bell.
The suggestion is that the demand is at the highest level in at least sixteen years.
That is hardly surprising when rates are heading for their highest real level since 2009.
There is, however, another possible dimension to this. UK investors know UK companies neither want nor need their money so they would rather invest it with the government instead. There their savings might be put to positive use.
This is, of course, what I suggest UK pension and ISA market reform should be all about. But when will politicians listen?
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this was interesting in Guardian yesterday
https://www.theguardian.com/commentisfree/2023/may/25/hedge-funds-capitalism-risk-asset-managers-tax#comment-162812828
If only they would listen.
A mixed economy of investment (private/state) is surely a healthy thing to have is it not?
Not having your eggs all in one basket and all that?
It’s pure market dogma that is the name of the game to me at the moment.
Richard,
I see that Simon Nixon in yesterday’s Times wrote about Reeve’s and Hunt’s announcements for pension reform ” this has left the government vulnerable to pressure from vested interests in the financial services….this is a recipe for bad policy with the price to paid by savers”.
So make the money flow to government instead
“There is, however, another possible dimension to this. UK investors know UK companies neither want nor need their money so they would rather invest it with the government instead.”
Why would companies who don’t want to invest in their own business do anything else? Perhaps they realise, as per my previous comment, that such high rates are unsustainable. In the short term they get higher rates. Movements on interest rates are likely to be down (after peaking at 5 or 5.5%), possibly sharply so once recession sets in. So there is little downside risk as they either lock in higher rates or realise a capital gain.
Pension funds will be used to tackle “climate change” I’d rather they just said pollution to be honest it’s much more clean cut.
Considering pensions frequently get raided for bad reasons or just gamble on the banking casino and lose seriously hurting peoples retirement investment actually using pension funds to guarentee a return for spending to save money snd gain growth is a good idea and less pollution is a big added bonus…. It is a good idea but the fuzziness surrounding climate change rather than tackling pollution is a curse and one of distrust and pensions can not be gaurenteed.
I don’t have a pension but if you told me that I could to pay in to something that was for the benefit of my future and others not just retirement money and it was guarenteed to produce something tangable cost saving energy saving and was given a share of the proceeds it sounds like an ok deal. Only problem is this is also the responsibility of the government and why we pay tax and a pension is for an individual not socialized pension pots.
Dusting off my PhD in the Bleeding Obvious, why not cut out the middle man and have a better basic state pension with the option to buy a bit more similar to what you get in most public sector schemes.
The only people who would lose would be the so called ‘Investment managers’
“The only people who would lose would be the so called ‘Investment managers’ ”
Not if it’s a good investment for which investing in our future will always be,,,,, The crux of this issue resides now in persuading private pension pots to up the gains so they spread their investments in to this and the usual banking casino stuff with a good chance of a return in monetry value.
Some big insurance companies in the US have thrown in the towell on the climate change agenda citing political attack. Seems they are not persuaded and let’s face it they don’t like paying out they just like to absorb in the hope that they never actually need to give you anything apart from peace of mind until the claim lands. Lost cause and not worth the effort it seems.
This is all about finding the capital but really people are the capital not money and it is neccesary to be honest and approach people not with buzzwords but reality and as you say allow national insurance to become a pot you can contribute more if you would like with something tangeble in return not just a hospital bill. and a state pension that might be a good thing to be implemented especially if it means funding the state pension so you can afford to say enough is enough.
I’ve always put the phenomenon down to more risk averse savers than in a country like the US, in general European savers are less pro risk assets. Also disposable income is lower here and that feeds into the risk aversion. Plus capital appreciation in European stocks has been lower than America, we are seen as more of a dividend play.
Surely any reform should be about increasing the flow of funds to pensioners, not grasping greedy interlopers.
Are you saying there should be no private pensions?
In my opinion, the statement “Pension reform should be all about improving the flow of funds to the government, not companies” requires careful consideration. While it is crucial to ensure that pension systems are sustainable and adequately funded, the exclusive focus on directing funds to the government overlooks the broader objectives and impacts of pension reform.
Pension reform should prioritize the well-being and financial security of the individuals relying on these retirement funds. It should aim to strike a balance between the needs of retirees and the financial stability of both the government and private companies.
By solely prioritizing the flow of funds to the government, we risk neglecting the interests of employees who have dedicated their careers to contributing to pension plans. It is vital to remember that pension systems serve as a means for workers to secure their financial future and maintain a decent standard of living during retirement.
Pension reform should address issues such as fund sustainability, investment strategies, transparency, and governance. It should focus on improving the overall effectiveness and efficiency of pension systems, ensuring that retirees can rely on stable and adequate income streams.
Ultimately, a holistic approach to pension reform should consider the interests of both individuals and the government. Striking the right balance will not only benefit retirees but also contribute to the overall economic stability and social welfare of the society as a whole. https://ssa-office.com/org/social-security-office-in-flushing/
Of course
But how can the benefit of employees be maximised by investing in destroying the planet?
When I joined my companies final salary scheme in 1967 I seem to remember investing in Gilts was compulsory. Am I wrong. When I looked to contribute to AVC ‘s in the mid 70s I had to put the contributions into Building Society Funds. No risk . Later on the managers invested in securities. I remember attending a seminar with Walter Scott who were one of the fund managers. They were keen on investing in riskier vehicles. Advising us that the bigger the risk the better the return. Really they were just salesmen.