The delay in announcing Alex Burghart as our new pension minister is, I am being old, due to his assuming a number of jobs including one to combat fraudulent benefit claims and another as the DWP’s growth minister.
This suggests a further dilution of the “pensions” brief. In 2017, when Guy Opperman was appointed, his new title of Minister for Pensions and Financial Inclusion was downgraded from Minister to Junior Minister and he struggled to get the 2021 Pension Schemes Act onto the statute books for two years. He had many headwinds, principally the pandemic but also Brexit and a general election but Alex looks like walking into a politically charged position.
Fortunately, Alex Burghart appears to be as Guy Opperman described him to me “Alex is bright, polite, and very capable”. Civil servants report him attentive and asking the right questions, he appears to have made a very positive start.
This is good, as pensions are not in “growth” mode. Estimates are that over £200bn has been force sold from the growth portfolios of our private funded DB plans. Most of this has been from equities which – when publicly listed – are liquid.
But worryingly three UK asset managers have said they are unable to handle heavy demand from investors seeking to withdraw from property funds, in another sign of how an accelerating decline in government bond prices is forcing pension funds to reallocate holdings.
Schroders told the FT it will make some redemptions originally due on Monday as late as July next year, while Columbia Threadneedle said volatile market conditions had forced it to switch from daily to monthly payouts. At the same time, BlackRock also imposed new restrictions on withdrawals.
DB pension funds have been asked to load up on illiquid “growth” assets , including investments in private equity, private debt and infrastructure to aid the Government’s growth agenda (Building Back Britain). But at a conference held yesterday in the City, several delegates , including former Regulator, Andrew Warwick-Thompson, called for an end to political interference in the investment by trustee’s of member assets.
Shackled with a “Growth” mandate
Including “Growth” as part of the new Minister’s title, looks set to provoke disquiet amongst fiduciaries whose responsibility is primarily to members, second to sponsors and only tangentially to the economic agenda of the Government.
This role is clearly being politicised.
From Pension Credit to Pension Debit?
Similarly, the inclusion of “fraud” in the proposed title of the Pension Minister gives a clear steer of the direction of the Government with regards the claiming of benefits. While the previous administrations coupled pensions with financial inclusion, it appears the new one is looking for ways to recoup Government revenues from the financially excluded.
It remains to be seen whether the DWP will be able to end the forthcoming PLSA conference. The original agenda had Guy Opperman speaking and it would be a sign of his personal confidence if Alex Burghart were to appear in person on Wednesday week.
Live action at the Conservative Party Conference
Despite the ongoing crisis facing occupational pensions in meeting collateral calls, the first public outing for the new minister was to discuss the pros and cons of extending the scope of auto-enrolment.
He was in evidence at yesterday’s Conservative Party Conference at a meeting of the Social Market Foundation which appears to have been a jolly affair
We’ve got a full house at #cpp to talk pensions adequacy with @GarethDavies_MP @alexburghart @ThePLSA @SMFthinktank and @PeoplesPension pic.twitter.com/5ix4ynEtFK
— Katy Louise (@KatyLouiseL) October 3, 2022
The new Minister felt comfortable enough to comment on photos emerging on twitter
A summary of the meeting is on this thread
We start off with @GarethDavies_MP talking about the success of auto-enrolment, and emphasising the need for building on it to ensure greater pensions adequacy
He has written for the SMF on extending auto-enrolment to young workershttps://t.co/iiJt4sKBWU
— Social Market Foundation (@SMFthinktank) October 3, 2022
You can get a taste of the new Minister in action by watching the video of the event
Henry, I do not believe DB schemes invested in private equity, infrastructure etc, because the Government has a Growth agenda, but because the investment they made, at least on paper had good expected returns, and probably some lower volatility, as they are not marked to market that often, and obviously harder to value them.
However with interest rates going harder, infrastructure investment are subject to “gravity” similar with Gilts and bonds. And highly leveraged private equity are also affected.