One of the main questions of this election so far is whether the public has moved on from its perception that a Conservative Government under Liz Truss , crashed the economy.

The answer that the Conservative party is getting is that we haven’t and that we rather prefer the right wing version of conservatism presented by Nigel Farage than that of Rishi Sunak. Considering the weight of money that goes into Conservative electioneering , it is extraordinary that polls are now showing Reform as popular as the current party of Government

An Ipsos poll reported in the FT tells us that

More than half of voters — 52 per cent — who think the UK economy is in a poor state point the finger of blame at decisions made by Truss and her chancellor Kwasi Kwarteng, nearly two years after the mini-Budget rocked financial markets.

And there are two consequences of this for British people;

1. Higher mortgages, limiting their spendable income today
2. Lower pensions, limiting their spendable income tomorrow.

Even more than high taxes, people are sick of high mortgages, high rents and low pensions and had the opposition parties the full understanding of the long-term damage done to our pockets by the spike in interest rates in 2022, they would make even more of this heinous act of economic vandalism.

The estimate of Keating and Clacher is that in the aftermath of the 2022 mini-budget, occupational schemes shed £166bn of their decades of accumulated wealth in paying off the bankers. That number is so colossal as to dwarf the current debates on affordability. The money was taken out of defined benefit pension schemes to meet margin calls and to this day the market is awash with assets that need to be sold because of the lack of liquidity in our once great schemes. Much has been made of the capacity of these schemes to sell-out to insurers, less is made of the reality that they do not have the assets to meet the insurer’s further demands. Far from being in rude health, our DB schemes have been robbed of their future to protect themselves from project fear – the illusion of insolvency created by QE. First Actuarial were right with their FAB index. Right through the period of quantitative easing they pointed out that on a best estimate basis, assets exceeded liabilities.

A snapshot in the middle of the rush to LDI

If pension schemes had the courage to have avoided LDI, the £166bn sell off would not have happened.

best estimates v “risk free”

Herding to and persisting with Leveraged LDI was a colossal mistake for this country and it happened on the watch of successive Conservative Governments. That it was not unwound in 2022 is testament to the systemic failures of product, advice and governance that created the leveraged LDI system in the first place

The public know that Truss wrecked our pension schemes and they sense that years of austerity that it endured in the preceding decade was blown by Truss’ mad antics. At the heart of LDI was the philosophy that demanded us tightening our belt and scrimping our way by. While other countries were investing, we were de-risking , driving hundreds of billions of pounds out of UK equities and into gilts and bonds.

The public also know that their pension pots have fallen from highs in early 2022 and not recovered soon. Those relying on Defined Contribution strategies and in their fifties and sixties saw the value of their pots fall by as much as a quarter in the second half of 2022. People cannot work out how what they were told were low risk “lifestyle” strategies , have failed them so badly. But they can see that the damage happened in the months leading up to and immediately after October 2022.

And we all know the cost of our mortgages today, costs that prevent people whose pensions have been denuded, of making good. The cost of living crisis was predicted in early 2022, but it has been felt ever since and the public is now calling the Conservative Government for crashing the economy. They are right to do so.

But in as much as the pensions industry toed the QE line , herded around LDI and its DC equivalent Lifestyle – we were complicit in this.  We stand accused of failing to act when we could have acted and the finger of blame points squarely at our inability to look beyond phrases such as “de-risking”. The Pension Regulator is also complicit, continuing to call for leveraged LDI immunisation of scheme funding positions against all reason.

As can be seen from the impressions , the Conservative advertisements are targeted at the people who were most impacted by the events following the mini-budget. But the public are more interested in their bank and pension balances than continuing to fear an alternative to Conservative economic mis-management.