There are three pension agendas in this election, one is being talked about, one is not being talked about (but is crucial), the third is the one the pension industry wants to be talked about (but isn’t on anyone else’s mind).

Let’s start with the third one first. Listen to the 70 minute discussion between Nico, Darren and journalist Nick Reeves to hear what the pension industry would like the pension agenda to be.

• increasing contributions through implementing the 2017 AE reforms, the pension dashboard, pot follows member (various versions) and better ESG metrics (Nico).  I haven’t heard anyone outside our bubble mention any of this stuff, it simply adds to the bonfire of vanities of the last Government, a pile of forgotten, failed or semi-complete policy initiatives that include Mid Life MOTs , pension awareness week and even the VFM/consolidation agenda. For heaven’s sake, we didn’t even get pre 2019 policies like CDC (which was legislated for) over the line.

The second is the agenda the politicians are feeding us, one almost entirely about the state pension and later life tax. This is characterised by the Conservatives telling vulnerable older voters that every other party (and especially Labour) is after their pension while every other party (apart from the Greens) hard codes protecting the triple-lock into their manifestos. This agenda played early and hard and appears to be played out.

The third and final agenda, much the most important and interesting to Rachel Reeves and Jeremy Hunt is about the creation of what Labour are calling “Wealth”. This has been misinterpreted by some in the wealth management industry as an endorsement of “wealth management” for individuals, a kind of aspirational policy where we all feel as well off as we think we ought to be.

This is not the vision of “wealth” spelt out by either shadow or actual Chancellor. It is a view of pensions as the liquid end of a national store of value matched only by the housing stock.

What is Labour proposing?

In an article published in the FT, Rachel Reeves says that we are paying the price for a decade of economic failure.

Ultimately, there is only one way out of the bind the country is in: a return to strong and sustained economic growth. Wealth creation will be the defining mission of the next Labour government.  (my bold)

Reeves starts her pitch by appealing to those who manage private equity as an investment class. She would have a different borrowing policy for Government for investment as for day to day spending. Labour’s fiscal rules are different

This differs in an important respect from the Conservative government’s fiscal rules, which include a borrowing rule that does not distinguish between day-to-day-spending and investment. This acts as an incentive to cut the investment needed to leverage private sector capital.

The state can borrow to invest while it will not borrow to meet the day to day costs of running Britain. This has implications for the gilts, corporate bond and private credit markets.

And just as Labour will borrow to invest , they will encourage investment from pension funds to compliment such borrowing

The new National Wealth Fund is what Reeves and Starmer are getting at when they talk about wealth creation. It is a collective fund used for the common good.

We need a partnership between a strategic state and business, so that new industries can thrive here and create good jobs from renewable energy, to AI, to life sciences. Partnership for investment will be embodied in new institutions: including a new National Wealth Fund.

This goes well beyond LTAFs and other means to get illiquids into private portfolios. This is about using “institutions” which might include the PPF, the (soon to be) £50bn+ master trusts and the remaining DB superfunds (USS, LGPS and the RailPen) to be the purchasers of assets held over time for the provision of pensions.

An easing of borrowing rules to facilitate long term borrowing and the encouragement of investment in long term UK capital by way of equity are what Labour refers to as “wealth creation”, they’re the policies that they see as getting us growth.

What are the Conservatives proposing?

Since it is a racing certainty that Rachel Reeves will be the next Chancellor I will not focus on how Jeremy Hunt will go about things, to the same degree

The policy is indeed more of the same, with a tight fiscal policy and a squeeze on unproductive workers who are to get back to work through cuts in benefits and in national insurance , through subsidies on childcare and on a continuation of the current fiscal policy .

This slow-burn approach is more fiscally conservative as it does not involve borrowing to invest and it relies more on wealth creation across the retail and institutional markets. It does not differ that much from that of Rachel Reeves and I suspect that were Hunt and Sunak not to be constrained , they would probably be more radical. But their constraints come from their own party, from backbenchers depending on the mass affluent scared of what they see as “socialism” and critical of any form of market intervention into how we actually have our money invested.

It is an approach which has led us down a blind ally. Huge amounts of institutional money has transferred to private wealth accounts (£36bn in CETVs in 2018 alone). Potentially productive capital is being lost to DB funds by the tacit encouragement from TPR of buy-out and buy-in to low dependency investment strategies. The PPF is being promoted over co-sponsored run on.

The reality of the last fourteen years is that schemes have been asked to take risk off the table and have done so though the disastrous strategy of borrowing to buy gilts and constraining sponsors from cap-ex to fund these expensive policies. The £166bn lost in the LDI blow-up was real money from deficit contributions rather than real investment returns.

The real difference

The Conservatives are right to warn the electorate that Labour has got designs on its pensions. Labour looks set to get things done in a much more determined way than the Conservatives who , despite a large majority, have failed to substantially move the dial on key areas where pensions could unlock growth. The PPF is hardly a store of national wealth, our DB schemes are denuded of listed and unlisted UK equities, much of our FTSE 250 is pretty well uninvestable because of doubly disclosing costs and charges, the master trusts and large occupational schemes are still way off the scale of allocation to alternatives seen from their overseas peers. There is a massive opportunity that arises from the inability of the Conservative party to implement change at an institutional level.

The real difference between Labour and Conservative Governments depends not on vision but on the capacity to implement that vision. The Conservatives had their chance and they blew it, Labour has the mindset and culture to introduce the national wealth fund that we had last century. It is what Frank Field called Britain’s great economic miracle. We had it, gave it away and now me must get it back – it is the private sector capital locked up in pensions