Tom Tugendhat is acerbic

He starts his opinion piece by explaining why he thinks pensions are one of two policies that exclude the young from prosperity (along with housing)

Two bad policies in particular have influenced this trajectory. The first was a set of regulatory changes over two decades ago that in effect compelled pension funds to liquidate their investments in domestic UK companies and replace them with government bonds.   That decision destroyed the core social contract that makes pensions work: the idea that the old profit from the energy of the young. Instead of fuelling living minds and ideas, wealth has been channelled into the dead hand of the state through gilts. Today, over 60 per cent of private sector defined benefit pension assets sit in gilts, with just 1 per cent in UK equities. This has starved British enterprise of long-term domestic capital, driving innovative companies like Arm Holdings and DeepMind to seek foreign investment, siphoning the wealth they create overseas.

he concludes…

the pension system requires fundamental reform. Channelling more of our nation’s savings back into powering UK companies, technology and entrepreneurs would fuel the industrial renaissance our economy requires and generate better long-term returns for pensioners too. Much of this won’t be popular. The current system serves many vested interests. But if we want the economy to grow we can no longer defend frozen assets; the country’s future is on the line.

I hope that Tom Tugendhat  is reading this blog, he will get plenty of support from the writing of the contributors who are in the boomer bulge but urge that we do what we can to restate the balance which is currently against the youngsters getting private pensions at all. Instead they are being promised cash in pension pots to top up a state pension which is generally considered too extravagant to be sustained beyond the current generations enjoying it. Witness the claim that workplace pensions will take over from the state pension by a CEO of a master trust from the Accenture platform on Wednesday.

There is one way for Britain to afford a good state pension and to pay properly into workplace pensions. That is – as Tugendhat tells us, to reflate our industrial economy as we did in the 1980s and 1990s to a point where we had something to be proud of. It has taken 20 years to deflate Britain but we have done so. John Hamilton spelt this out at the PLSA East Midlands event in February when he pointed to 20 years of regulatory clampdown on growth.

I go to pension conferences and see row upon row of people my sex, my age, my class. my ethnicity and we are as one in “de-risking” what we have so that our pensions get paid as annuities or are invested in gilts that match the liabilities – which is what Tugendhat rightly defines as the aim (the Bank of England do it – we should do it)

Here is what our Bank of England does with its own staff’s pension money

Let us not pretend that the BOE which includes the PRA is on the same page as the Treasury and DWP as they argue for pensions to embrace growth. The privilege taken by the Bank of England is to pull up the drawbridge , ensuring the privilege of contributions from the tax-payer and no contribution from investments

You don’t have to be a pension expert to see that there is no investment in the BOE’s own pension fund, the same can be said for the £2 trillion private pension system. It is only in DC where growth is being sort but here there are no pensions, all risk is being taken by the young.

Tugendhat is right, this is not the way to carry on. That is why I support the Pension Schemes Bill , which is trying to do something to restart Britain.