One answer is that the Chancellor of the Exchequer has a mandate given him by the Prime Minister, by his party and by the nation that has elected him into Government. We get what we vote for and while the Mansion House Reforms weren’t in the the 2019 manifesto, they are unlikely to be enacted till the final days of this Government (if then).
Another answer is that letters of support don’t get supported. Most don’t get published and those that do get shot down on social media. Meanwhile, letters that criticize are generally liked, because it’s easy.
Thirdly, those who are keen to get things done are focused on using channels that promote positive action. Witness the way that City of London Mayor, Nicholas Lyons uses Linked in.
The Mansion House Reforms are collectively positive, they are aimed at getting better value for the money we put into pensions as well as making the money the tax-payer puts behind pensions, work harder for the country.
They call for a redistribution of money allocated to non-productive investment to productive investment and behind them is a spirit of endeavor that rewards entrepreneurship, risk-taking and innovation. All of these things can be mocked as “arm-waving” by those who don’t take risks and innovate.
There is a great unspoken energy which supports the spirit of the Mansion House Reforms. It funds venture capital through EIS and SEIS , those who have a project that needs funding can resort to crowd-funding through platforms such as Seedrs. Charitable sites such as Just Giving ensure that good things get done. When they are, they are celebrated, not denigrated, on Facebook pages and websites set up to say please and thankyou.
Apart from the baying mob, whose comments litter the financial press, there is a benevolent majority whose aims are aligned with Christian , Muslim, Jewish and humanist values of fairness and sharing (my list in not exclusive). This benevolent (typically silent) majority, has a latency and it’s what the poet Keats refers to in a famous letter
several things dovetailed in my mind, & at once it struck me, what quality went to form a Man of Achievement especially in Literature & which Shakespeare possessed so enormously – I mean Negative Capability, that is when a man is capable of being in uncertainties, Mysteries, doubts, without any irritable reaching after fact & reason
The key to negative capability is “being in uncertainty” without irritable reaching after fact and reason”.
So here is the fourth reason why we don’t see many people writing letter of support of the Mansion House reforms in the FT. It is that the reforms reach out to uncertainty and do not seek to justify their ambition with fact and reason. Rather, they tap into the negative capability, the power of the unseen and unheard.
There are no letters reasoning for the Mansion House reforms, because they speculate that things will happen from actions yet to be taken. They tap our negative capability.
Christopher Columbus did not have an evidence based business plan, we do not go to church for a return on investment. We do things because we know they are the right thing to do.
“Pensions Expert” ?
Being able to fit a door, doesn’t mean I know how to build a house. So be it with LDI proponents. It should be a niche part of the solution. If you are the first mover, the only person doing LDI, and so when considered at a single scheme basis, a model can be constructed (if anyone properly understands duration adjusted approximate matching) that could be of some limited use. But when implemented on a whole system basis, and especially with leverage it is not sustainable.
The Govt is at last awake to this, but it is in a bit of pickle here – it knows the model is broke, but can’t have schemes offloading Gilts of any scale (they need continued take up to “pay for vital public services”), and so it needs to promote some other ways to get of getting a toe back into investment-waters needed for our economy.
The scale of DB pensions and their impact, or the drag, they have on productivity is just too large to continue to be ignored. Something must be done, and the Mansion House Reforms are but an acknowledgement of that, they are are timid, but at least a step in the right direction. There is no way forward for an economy that invests predominately in its own Gilts. And make no mistake, when considered in aggregate the scale of DB pension funding is so colossal that it counts as an economy, certainly in terms of the impact it his on UKPLC.
We also seem to have lost the understanding of the difference between “money” (or our “pots”) and a pension.
Money is of a fixed value, a token we hold or receive with which to exchange for goods and services. A pension, properly constructed, should provide the age-restricted ex-workers with an income for life related to some share of the economy, and crucially is provided by those still working. If we do not have a growing economy, or too few workers, or too little economic output to pay the pensions (in money), then the pensions become worth less (a lot less). By overloading, on a whole system basis, the dependency of ever receiving a pension payment onto gilts (future taxation) on the colossal scale as witnessed, rather than into the productive part of the economy, we increase the likelihood that “the system” will not be able to afford to pay the pensions promised.
Look to history, globally, and think carefully about how that might end – an overburdened, overtaxed, underinvested, under capitalised renter worker-population, being expected to fund a Govt not for public services but to fund the gilts required to pay £1trn – £2trn of (formerly) private sector pensions. How do we think that will play out…?
The lack of commentary in support of the Mansion House Reforms may be because no-one has told “the industry” what to think in this new paradigm? The UK is blessed with some of the world’s most creative financiers and investors, but do not confuse them with “the industry” – that is the reserve of the actuaries and the lawyers, the ultimate rule makers and followers. They are getting there, slowly but surely, as by nature they are cautious and slow to change – rightly so, pensions are a serious and long term endeavour. And others in the industry while aware to the systemic risk they have created, continue with the same old song, hoping for a sufficient share of the current buy-in feeding frenzy, before sloping off into their leisure, golf club, or marina dotage.
Our DB pensions assets (private the state / local govt funded too) should have been considered as a National store of wealth, investing more in diversified pools of long term assets to pay our pensions, and as match for any of the worlds’ other +£1trn sovereign wealth funds (such as the Norwegian, or the Saudi’s). Better late than never, but the journey is going to be bumpy and the buffers will be tested.