I can think of nothing that the Secretary of State for Work and Pensions could do that would be so counter productive as this.
UK secretary of state for work and pensions announces plans for “programme of education” for #pension scheme trustees in 2023. #PLSA #ESG pic.twitter.com/Luwx8NhZRq
— Josephine Cumbo (@JosephineCumbo) March 10, 2022
Pension Trustees do not need re-education. They will resist any attempt to coerce them into a course of action that they do not consider in the interests of their members.
Pension Trustees have to consider the interests of their members in the round. It is in the interests of members to live in a society where environmental, social and governance issues are properly considered and action taken to mitigate risks and maximise happiness.
No one is going to object to a means of increasing access to assets that improve ESG. The Pensions Industry should be and is supportive of measures from Government to make this easier.
BREAKING: UK government to bring forward legislation soon to enable UK #pension funds to invest in productive finance such as infrastructure, Therese Coffey, Secretary of State for Work and Pensions tells the @ThePLSA #ESG2022 conference.
— Josephine Cumbo (@JosephineCumbo) March 10, 2022
But embedded in Therese Coffey’s approach is a deeply offensive sentiment that trustees are not to be trusted.
Re-education programs are common around the world. They are much loved by the authoritarian regimes of the east.
They did this to IFA’s in 1988 and what followed was another £billion a year increase in costs of doing business and a reduction in the savings rate. If only Government would look after the economy then savings could be increased. Limiting contributions and capping the fund size diminishes the ability to find for a living wage in retirement. Maybe some basic math training for Ministers would be a better use of money
It seems that DWP and HMT are determined to raise finance from DC funds for their favoured infrastructure projects. They see this as using private illiquid instruments. The UK DC market is currently around £0.5 trillion, but these funds are already invested (in publicly traded instruments in the main). The managers of private illiquid funds are sitting on unprecedentedly high amounts of ‘dry powder’ (funds which have been committed but not yet invested – by some estimates as much as £2.5 trillion. The question that HMT and DWP should be asking is why this has not been invested in their favoured projects. They appear more in deed of education than trustees.
There is also a significant issue of cyclicality and the appropriateness of HMT and DWP’s timing. Private, illiquid funds are extremely cyclical – low returns follow gluts of new commitments much as night follows day. The record levels of funds raised last year should be cause for concern in that regard.
Hello Henry,
What ‘infrastructure’ do we think the HMG has in mind? The ever-shrinking HS2 or even, perhaps Chelsea FC…!
Kind regards,
Tim Simpson