IFS says Government tinkering with pension investment doesn’t amount to a tax


Speaking to a meeting of the Pension PlayPen , Carl Emmerson, Deputy Director of the IFS said that were a future Government to mandate DC schemes make a 5% allocation of their default funds to a £50bn Government Growth Fund, he would not consider this a tax.

Emmerson went on to say he did, however, think such a strategy would likely have a big impact on how DC savers funds were invested and while the IFS pension review was not going to focus on investment strategies, it would not ignore the possible outcomes of invested funds in its current Pensions Review.

The conversation came after the FT reported Rachel Reeves supporting proposals from City of London mayor Nicholas Lyons for such a fund and for mandatory contributions if the funders and trustees of DC pensions are reluctant to invest voluntarily.

Many people think such an intervention would simply replace direct taxation with an indirect tax on pensions. I welcome the IFS taking such a straightforward position which should help reduce unnecessary noise.

You can view and download the slides from the event here.

You can watch the event here

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to IFS says Government tinkering with pension investment doesn’t amount to a tax

  1. John Mather says:

    Government and growth in the same sentence, really!!
    RPI 12% year on year announced today
    FTSE has gone sideways since 2000
    Clearly VFM is not connected to outcomes

  2. jnamdoc says:

    Under TPR , the current DB regulator system is already a hugely destructive tax on investment, serving as tourniquet around the neck of economic growth. Anything that recognises and reverses that can only be a force for good.

    TPR Funding codes coerce schemes to “de-risk”, schemes selling good assets, and buying gilts on a monumental scale – helpfully (for Govt) providing a ready supply of funding, who in turn will pay the private pensions via the yield and redemption on the gilts. De-facto we’ve had a nationalisation of the funding of private pension schemes, in return for confiscation of DB Scheme assets.

    That’s all fine until the bulk of schemes have de-risked and are loaded up on gilts (either directly or via insurers). The problem starts when:
    a) the Schemes have no more good assets to sell to provide that steady source of funds to Govt for gilts, and
    b) the market realises the improbability of (a low productivity) economy ever being able to service the monumental issuance of gilts. Wait for LDI-2 debacle.

    It felt inconceivable to most just over 2 years ago when 20yr gilts were offering 0.25% – 0.5% yield and you had to lose money to hold ILGs (indeed as many did quite massively last Sept/Oct), that rates would be 4.5%. Why does anyone thinks a another similar step change increase can’t happen…..

    So, any change in policy at all from the current investment deathtrap can only be positive.

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