Somewhere over the past four weeks , a comment made to the FT by City of London Mayor- Nicholas Lyons has become a “cause celebre” for – well just about everyone!

This is how the FT reported what he said

Nicholas Lyons, the City’s Lord Mayor, told the Financial Times last month that he had held talks with the Treasury about forcing pension funds to invest in a proposed £50bn growth fund. “I would like mandatorily to have 5 per cent of [every single DC pension] put into that future growth fund,” he said, estimating that there was a pensions pool of about £2tn to draw on.

If this was designed to promote debate , it certainly has

Simon Nixon asks yesterday asks  in the Times,  

“Why does London need a dedicated UK fund limited to investing in UK start-ups?”

The previous day, Patrick Hosking warns politicians to “stop meddling with pension schemes”

Forcing them to “buy British” would be a terrible idea, risking lower returns — and therefore smaller pensions (for those in defined contribution schemes), or higher employer contributions (in the case of defined benefit schemes).

He’d earlier reported

The lord mayor of London, Sir Nicholas Lyons, has proposed a new £50 billion fund that would be built up by forcing all UK defined contribution schemes to allocate at least 5 per cent of contributions to it.

and he had spoken with Amanda Blanc , CEO of Aviva who

cast doubt on the wisdom of a proposed new “future growth fund”, saying it would be complex, bureaucratic and take years to set up, while the recommendation that all UK defined contribution pension schemes should be forced to fund it was misguided.

“I don’t think compulsion is ever a very good thing in free markets,” she told The Times. “I don’t think making it mandatory is a good idea at all.”

Norma Cohen tweets against market intervention, quoting Chris Giles in the FT

If private British financial capital isn’t being invested at home, it’s because owners believe it can achieve better risk-adjust returns elsewhere. Forcing UK pension funds to buy into UK business is no answer, as this excellent column points out. https://t.co/HpD9kD6Chn

— Norma Cohen (@NormaCohen3) May 26, 2023

Chris Giles quotes the CBI, and produces a chart that suggests that it is not capital but conviction that’s needed

and Romi Savova writes told the Sun that

“encouraging backing for a growth fund was not guaranteed to generate higher returns for savers”.

“When it comes to industrial development in the public interest, the UK has a strong record of delivering fat profits to consultants and contractors, and a less strong history of delivering great projects on time and on budget.”

By the time the Sun had got hold of the story , it had moved on from a chance remark to the FT , to a cross-party threat to a new Labour party policy

POTTY PLAN 

Labour’s plan to force pension funds to invest in a £50bn growth pot slammed by industry boss

The original headline has been toned down a little

Behind this mainstream journalism is of course the vitriol of the comments on these articles. We have here a proper debate being argued at a number of levels. This is a very important debate for pensions to have, it goes to the heart of the question of what we consider “value” for our money.

Let’s take a step back.

These are Nicholas Lyons latest words in a Linked in post

it’s so important to have a proper debate about providing every pensioner with access to investment in productive assets as we face into inflation which will erode the value of long term savings. The returns for conventional pensions that invested heavily in bonds over the last 5 years are going to deliver losses as rising interest rates and falling bond prices start to bite. The contrast that we have seen in returns over the last 5 years vs Canadian and Australian pension pots that have 35-50% exposure to alternative, unlisted asset classes will start to widen much more dramatically.

He has made it clear that he is not proposing the 5% mandation – despite the earlier comment. In fact ,I can’t find anybody who is backing such an intervention now – including Nicholas Lyons!

Yet that chance comment – to use a phrase from another Nicholas Lyons’ post “has stuck like chewing gum to the sole of my foot”.

It is infact the comment that has made the debate happen. Opinion is important, especially when it comes from someone influential.

The story is the story

I expect that Nicholas Lyons is wishing he never mentioned that 5%. But he has to live with the consequences of what he said and accept that it can be taken out of context and  turned against him – the story is that the Lord Mayor of the City of London said what he meant and has since taken a different view.

Had he not mentioned mandation , much of what has followed might not have happened. We might not be debating what  value there is in  DC funds investing in private markets. We might not be considering what we are investing in. Many people reading the articles above may not realise they are invested at all.

The story is that for the first time since auto-enrolment began, we are having a proper debate about where the money we, our employers and the taxman invests in our pension pots – goes.

A debate that has to happen

And now we have further discussions around how we invest the Pension Protection fund

The Telegraph has published an important piece calling for better deployment of the money that sits inside pensions, as DC pots and as the source of money to pay defined benefit pensions.

You can read Simon Foy’s article in the Telegraph here

No reason for the Lord Mayor not to express his opinion.

Nicholas Lyons has done us all a favor by inciting this debate. People may dislike his being a City big-wig , as they might dislike Andy Briggs, Nigel Wilson and Peter Harrison. But that doesn’t make them and their ideas wrong.

Nor are Norma Cohen, Chris Giles, Romi Savova , Amanda Blanc, Patrick Hosking and Simon Nixon wrong for taking an opposite view.

Both sides are right for having this conversation and I happen to be on the side of Lyons on this one. That doesn’t make me Labour or Tory – or both! It is simply me, having an opinion, which we can count our lucky stars – we are allowed to have!