Jo Cumbo

Josephine Cumbo is running a thread on Linked in which is an interesting take on this country’s view on the Government’s intervention over how investment in pensions should have a bias towards UK stocks and in particular growth stocks likely to drive our economy forward. This was started as the Mansion Compact but more lately has been less a compact and more a mandate (the former being a hand shake , the latter a gun to the head).

Here is Jo Cumbo using strong language,

to what extent does this constitute a form of indirect expropriation? Secondly, does the loss of investment discretion — and the potential reallocation of private hashtag#pension savings to state-prioritised uses — represent a violation of property rights in substance, even if formal ownership remains unchanged?

Expropriation is a “legal only” word meaning the take over of private holdings for another’s purpose, my flat in the City was built on expropriated land during the reformation (Blackfriars to be exact – I live in Friars Street).

It is – historically – extremely liberal to argue that the state should not be interfering in pension investments, since a high proportion of money in funded pensions would otherwise have gone to the state’s Exchequer through taxes, relieved by pension tax laws.

You can see how the argument goes. Somewhere deep in the thread created by one of our top pension journalists is my contribution, an observation that the majority of UK citizens, when shown the low amount of pension funds invested in the UK were shocked, preferring a home bias so that the things they needed funding , transport and health infrastructure for instance, should be done with British money. I likened my view of my pension like my view of my football team, as something I’d like a home bias in composition.

Jo is flying, responding to all posts with the rigour we have become used to. But I don’t agree with her, I do think that the State should put a backstop of mandation to ensure that the country we retire into is economically sound in years to come. In this I am definitely out of step with the pension industry as can be discovered by reading Pensions UK’s submission to the Government, more of which over the weekend.

To me this paragraph is wrong

However, broad new powers to direct pension investment raise concerns and introduce risks to savers. Pensions UK is calling for amendments to limit these risks.

The problem with the investment of British pension money this century has been a reluctance to take risk not avoid it. We have avoided risks to such a point that we were over insured against imagined risks that we nearly brought calamity on the country in 2022. We needed to be bailed out by the Bank of England for our over-zealous geared liability driven investment.

Pension schemes like AB foods and Stagecoach  the Local Government Pension Scheme that avoided de-risking through LDI are now strong and able to make the kind of investments that benefit our economy.

In short, following the “de-risking” strategies adopted by most members originally of the NAPF, then PLSA now Pensions UK has proved very risky to the asset bases of many pension schemes. They are kept notionally in surplus because of the high yields of gilts resulting from the Government’s bare cupboards. The remaining DB funds with ambition  need restocking with growth funds. So do the workplace funds that have replaced them. We must prioritise growth in the UK just as we should prioritise investments that keep the climate bearable.

I may not agree with Jo Cumbo here, but her reporting over the last 10 years has constantly promoted what any liberal would consider right. I suspect the positions adopted by her and most in Pensions UK are “in principal” not “in practice”. I suspect that we will see a return to investment in the UK and in growth stocks whatever the liberal pleading.

Jo reporting on the BSPS calamity in Port Talbot in 2017