I worked for a couple of months earlier this year with Colin and found out that everyone likes and admires him (“too good for Aon” – said one of my friends). I don’t know much about Aon but I like Colin’s views which are insightful and his posts make sense (if people only read factsheets!).

This post was a month ago and I commented on the FT article where Katie Martin was getting nostalgic for the 1990s when people’s pension fund was invested in the UK

Reasonable people can disagree about whether it matters for the UK to have a slick stock market with lots of new companies joining its ranks. I think we would miss it terribly if it withered away entirely, which it will do without some serious work. And efforts led by London Stock Exchange’s chief executive Dame Julia Hoggett to turn the tide — aided, of course, by the agenda that chancellor Rachel Reeves underlined at her Mansion House speech this week — stem from only the best intentions. The wheels are turning towards ever more strongly encouraging pensions to buy British, though compelling them to do so remains a somewhat toxic prospect.

We’ve had Ros Altmann’s bright idea of linking corporate and personal tax relief to what the pension fund is doing by way of investing in the UK.  Of course this is fine if companies had some control of where the money was going but they don’t. The providers of commercial workplace pensions do , so long as they limit choice. Some, like Hargreaves Lansdown have encouraged people to engage among members (with a little success). But the reality is that the people who pay tax and get tax relief are members and sponsors and the organisations that organise investments are commercial master trusts and insurers running GPPs.

And of course the link between Paternoster Square’s London Stock Exchange and the boardroom is no longer strong enough to ensure that pensions link the two. Boardrooms are no longer reporting to our stock exchange and even where they are , as Rolls Royce is, there seems no inclination to control investment of a pension scheme which is sponsored , instead the pension scheme is transferred to the control of a private equity fund controlling an insurance company from the USA – or a Bermudian subsidiary.

The vast majority of British companies are no longer floated on the London Stock Exchange nor dependent on UK pension schemes for investment in their stock. I don’t think that we consider these questions of ownership as we did, as I did as a boy at school or in my early days at work. In those days I used to look at stock prices in the papers because it was really important, many kids I knew thought that way.

So to Colin’s point, we have lost touch with where our money is invested and we now can have more money invested in Google or Meta or Microsoft than we can have invested in British stocks together!

I think that the default decumulation funds that are due to arrive over the next couple of years will start becoming important if the amount of pension people get month in month out, is based on the performance of the underlying assets. It is quite easy to avoid fund performance and the underlying assets in the funds when you are building up the pot, because we simply don’t connect with the value of our pension savings pot.

Here is how I checked out what was happening to my retirement fund (except for the Nest bit)

I get an update of the number that this statement leads on to every morning, but it’s not like my bank account. I certainly don’t know what my top ten holding are unless I navigate from here to

And from there to details about my “Future World” fund

I ask myself whether I know anything about what the 3.3% of the fund investing in the UK invests in , the vast majority of my pension (nearly 3/4) is invested in the far east and America – not even Europe. I like looking at these charts because they are so well laid out but they are not designed to tell me what makes my “Future World” look so little to do with Britain.

The other fund is even more extreme with only 3.2% invested in the UK , more than twice the money invested in Britain is invested in Microsoft! Four American stocks have higher allocations than this worldwide fund invests in the whole of UK.

They’re all big players in AI which burns up huge amounts of energy and my guess is that they’re requiring some fuel to be burned (but let that be). They are doing well because they’re into AI so let them stay building my pot (I say hypocritically).

A more pertinent point  is that when I start relying on this money (which is the bulk of my savings ) to pay me a pension – if and when I default – it will be around 10 American companies that will be responsible for paying just under a third of my monthly pay!

The FT’s “Unhedged “reports

The 10 largest US stocks by market cap are Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta, Broadcom, Tesla, Berkshire Hathaway, and JPMorgan Chase. Together they account for (all figures from S&P CapitalIQ):

• 40 per cent of the value of the S&P 500.
• 56 per cent of the S&P increase in value since the market bottomed on April eighth.
• 31 per cent of the growth in revenues for the index over the past 12 months.
• 55 per cent of the growth in net income for the index over the past 12 months (despite falling net income over that period at Apple, Tesla, and Berkshire).
• 69 per cent of the growth in capital expenditure for the index over the past 12 months.

It’s not just that these 10 companies are making all the market gains. They are also producing a whopping portion of the growth in corporate America.

If things carry on the way they have these past 10 years  (happy years), I will have no problems. But if my decumulation fund was invested this way, wouldn’t I start getting a little bit more  interested in the regular income that these 10 stocks were paying me.

Of course I am exaggerating because decumulation funds will be diversified into other assets but my point remains. People whose income will be arriving each month will be interested in variability. My partner owns a lot of premium bonds and every month she gets a (very expensive to send)  statement of how much she has won. She and I know that it’s luck, but that doesn’t explain variable pay from decumulation funds. Infact the task given to providers by the Pension Schemes Bill (Act coming) is for a regular income.

Now of course the stocks I have now and the stocks in my decumulation fund may be different and the decumulation fund may have more than 3% in the UK but here we get down to two big questions, first the rate of pay and secondly the security of payments.

I am of course following my pot’s progress but nothing like I will be bothered if my default decumulation fund offers me variable pay which I don’t understand at all. If these funds turn up in my decumulation fund I’ll want to know why Microsoft is more than twice important than the whole of the UK! I’ll want to understand what it’s the biggest company in the “Future World” and does the most to exclude me from “Fossil Fuel”.

To come back to Colin’s suggestion, I think we need to ask whether we’ll ever get to a point where we understand what is going on with our funds. What we need is a simpler way to work out if we’re getting value for money and the question is whether it’s value for our money to have it invested in Rolls Royce rather than Microsoft, BP rather than Apple.

Do we need to have a rating for VFM which is called “patriotic”. Are we ready to get paid less by our pension to have a high patriotic score? I suggest that we won’t (voluntarily) , the only way we are going to wear a patriotic sticker right now is through mandates on investment in the UK. That’s a tax and one we’re only going to pay if we see the point.