What a lot of rot!
It’s wake up and smell the country’s industrial failure due to lack of investment. Unfortunately we have the lawyers at work to undermine a perfectly sensible future law requiring mega funds to get stuck into investments in British companies whether private or public. This blog has been over this time and again and we’ve had it debated in the Pension PlayPen. Charles Randell is a friend and normally I will side with him but not this time. Here he is in the FT
“The provision isn’t framed as a reserve power and doesn’t promise that there won’t be detriment to pension savers,”
said Charles Randell, former chair of the Financial Conduct Authority.
“This is a pity, given the case for the intervention doesn’t seem to be very convincing in the first place. I worry that this could undermine trust in pension saving.”
Compared with what? Compared with the trust that ordinary people have to a fully diversified investment in global equities and bonds using American index fund managers like State Street, Black Rock and Vanguard?
If we are invested in SIPPs without the buying power of mega-funds, then maybe public listed only is the way, but that’s not what the Government is talking about. Wealth management might better happen in £25bn + funds than in private portfolios.
Private portfolios might please the kind of people who sit in Slaughter and May’s cafe and ample reception but for the kind of people who comprise the majority of our population, the whereabouts of the money they’ve paid in through payroll deductions is a matter for trustees who know what they are doing.
Most people trust “trusts” and most trusts are now invested in a range of equities and bonds that will increasingly become British as we reorganise our capital markets.
GAD is right when it says that investing in Britain is unlikely to manifestly increase returns on saver funds or increase the pensions they get from them, whether invested at home or abroad, the major factors that influence returns are global but to tolerate Britain continuing to lag other nations in the “G7” in productivity because of lack of investment has fundamental problems for people. It means they earn less, contribute less and have to work longer because we are less productive. GET REAL – as the Pension Minister told us in Edinburgh.
The Treasury said the power to set asset allocation targets was “there as a backstop” and added “we do not expect to have to use it because we’re confident that schemes are now moving in the right direction, towards a greater focus on diversification and investment returns for savers”.
Come on Charles, GET REAL, the only advocates of total diversification are Lloyds Bank whose Scottish Widows outfit thinks it will win general consent by returning to the strategies that got Britain in the mess it is right now. Lawyers can argue till they are blue in the face (and at the voting box) but ordinary people want to get involved in putting things right. Charles, like me, is old enough to remember the days when we invested in BT . British Gas and other de-nationalisations. We are a nation of risk-takers when it’s clear that the risk will pay off over time.
My company got 500 investors getting their wallets out and paying me to improve VFM, people will when they see the point.
If we think that the answer to “adequate engagement” in our pensions is to stick the money with an American indexer and claim that diversification is the only free lunch then we ignore the success of the shareholder culture that I grew up with, one where people got a move on like Sid and where the Down-Sayers, said so from the privilidged possession of captured wealth.