I look forward to July 1st and the possibility that the next Mansion House Speech will bring forward progress towards a Britain properly funded and partially funded by pensions. I get this from Ros Altmann
We have the text of Ros Altmann in the Lords Debate on the Spending Review 2025 -in the House of Lords at 12:34 pm on 12 June 2025.
Value for Money for the taxpayer from the pension system? Maybe it should be measured by the value pensions are generating in the economy we pay tax and get paid our pensions.
Lord Spencer Livermore is clear about his position , speaking as a former Treasury Mandarin
I do not want to compete with these two statements, I will let them sit alone and you can read them in context by following this link.
I would like the taxpayer to get Value for Money for the tax revenue they forego to offer tax incentives to every saver into the private and public second pensions -second only to the state pension. The tax-payer can and should expect investment in the UK they are not getting. Only 2p in the £1 of money invested into Nest, the Government’s pension, is actually invested to fund UK businesses.
I hope that Baroness Altmann’s call for a direct link between the way we invest and the incentives we get for the way we invest are clear. If there isn’t a way to audit pension megafunds going forward, how will the tax-payer know pensions are working for them as tax-payers (rather than pensioners). Tax-payers are of course also pensioners in a system where we are all caught up, being both brings a universality to the argument that Altmann and Livermore bring to the Lords.
We need targets and a firm commitment to deliver and finally a means to measure if this is achieved and maybe this is what we are going to get over the next few years with the process starting on July 1st.
While I do not wish to seem to criticise the noble Baroness and Lord, I do think the Government has to think hard about whether there is any advantage in having UK pension funds prioritise investment in UK based companies.
In 2006 when dealing with a then small pension fund investing in a traditional 60/40 basis in index tracking equities tracking the FT All Share Index and the bond investments in UK gilts and sterling denominated bonds, I considered the average duration of the pension scheme liabilities (35 years) against UK population demographics. Even with the then net inward migration (including from recently accessed EU countries) of around 250,000, the birth rate below the replacement fertility rate and falling indicated that by the 2040s (1.5 generations on) the absolute UK population would be measurably smaller than it currently was. However even more significantly the working age population would be a much lower proportion of the total population. In the 2040’s therefore we have a much larger population living off their savings and a much smaller proportion of the population generating income, paying taxes, and investing (including in houses). This national net disinvestment is likely to force down market prices and hence the redemption value of our investments would be depressed at the very time we needed to sell them to pay our pensions.
Although we recognised that over half the FT All Share Index was tracking commercial activity outside the UK, what we did in the pension scheme was to reduce our exposure to the UK index and invest the majority of equity assets in tracking indices outside the UK but with enforced diversification (e.g. not more than 25% in the U.S.).
Put crudely, we were seeking the workers in other countries to pay the pensions of our UK pensioners.
The position would be even worse if encouragement of a particular investment profile by significant market participants pushes up acquisition prices. There is unlikely to be sufficient new UK based development capital demand for the level of funds being suggested without pushing up prices. To me there seems to be a high risk that inflated prices would be paid for “secondary” assets being sold by existing investors (e.g. from closed ended funds). There is also no benefit to either pension schemes or the UK economy from investment products being created to meet market demand out of existing commercial activities with limited future intrinsic capital investment requirements. A close to home example being private equity vehicles created to purchase professional service partnerships.