I had one of those moments yesterday when you realise what you are actually doing and are able to explain it with blinding lucidity. Like Paul had on the road to Damascus
We’d been labouring through chart after chart , trying to explain what we were up to and someone in the room asked that searing question “so what makes you any different?”.
So there was quiet as us “experts”, were forced to confront our own self-confidence. then with blinding flash that made Paul both blind and a “see-er”, it came to me. What’s different about the way I see pensions (and the way those around me see pensions) is “investment“. And we had been so stupid as to have put this out of mind.
It’s much simpler than we ever thought
So I said it. I said that what was different about our solution to the problems that pension schemes are facing is always the same. Invest your money better.
And of course most of the problems that “beset us round – are dismal stories”, stories of failure that pull us back. That is why the lifestyling of people’s savings declines to bonds and gilts – because of dismal stories about the failure of longer term assets to provide superior returns, because of the siren calls for liquidity and because of the false prophets who propose tax structures as the answer to every need.
What is needed to succeed in pensions is investable capital , the means to invest and people will the courage of their conviction. It’s much simpler than we ever thought.
Complexity is the enemy of action
When I look at the lack of action in pensions I could weep. There are literally trillions of pounds available to the UK economy right now , languishing in unproductive assets or put to work in overseas markets where the beneficiaries of the investments will have nothing to do with the capital held.
We are giving our money to some organisations so awash with capital that their best idea is to give us the money back by way of share buy-backs.
Not only are we not investing but the companies we have invested in in the past, have stopped investing too!
Rather than building plants and creating the machinery to do more, they are inventing ways to chop the workforce so the business does less. This in the name of de-risking.
So complex is the power of the financial economics, that organisations struggle to take any long-term decisions, citing the all important 3-5 year time horizons over which their efforts will be judged. This leads to complex decision making that leads to inaction.
Cutting through the crap
The basis of any long-term plan is investment. Investment is the process of deferring gratification today, for rewards tomorrow. Much as I enjoy listening to conversations about tax and insurance and structures and engagement and safeguarding and de-risking, all of these concepts are peripheral to the main event, which is the long-term investment of our money in long-term assets which bring us tangible benefit.
To suppose that timeframes for this to happen are 3-5 years, as I hear all the time – is crap. For an investment plan for our retirements to come together , the timeframes need to be ten times longer- we should be thinking of the benefits of what we plant now, as harvestable in 2050 to 2070. Sure we can pick fruits off the branches of the trees between then but a tree does not reach maturity in years, it takes decades. Many of our great forests have been growing for centuries and are now yielding timber from seeds that germinated in the 18th and 19th centuries. Forestry is a good comparator, trees grow away from the crap, so should pensions!
No need for fancy charts on this blog!
At this point of a blog, I’m tempted to load up some fancy chart showing the benefit of investment by looking at the last 200 years, or comparing how the bond and equity markets have performed. We all know those graphs and what they tell us.
And then we go and do the opposite , believing that what we should be giving people is their money back in 3-5 years.
Nope, the basis of what we are doing is “long term investing” , by “we”, I mean the people working in the common endeavour known as Pension Superfund and my personal endeavour to create a pension SuperHaven to get corporate and personal pensions back in shape.
You either believe in investing or you don’t. If you do, you must recognise that short term money management tools like bonds and cash deposits are not investments, they are merely financial instruments to take care of short term problems. Investment is like the vision that Paul had, so blindingly obvious that when it hits you between the eyes, you get blinded;- as Paul was – as I was.