Good news for the markets, Rachel Reeves is hinting that taxes will go up after all, breaking the rules she set when she arrived in number 11. Hurray?

No- not “hurray” if you are managing a pension accounting for its future payments hoping gilt yields are high. Gilt yields are crashing as the cost to buy annuities recovers, as discount rates for DB plans shrinks surpluses. Pensions benefit from a growth strategy from the Exchequer , not a return to austerity – that we look like having in November.

Borrowing costs for Rachel Reeves are recovering as yields fall fast (this chart shows that she is paying less for our borrowings than at any time this year). But inflation looks like it is going up to 4% (announcement expected next week and anyone who shops for basic foods knows that the cost of meat, fruit, milk and other staples is a lot higher). That means that mortgage and credit card debts are high and the Bank of England aren’t expecting any reductions in interest rates till next spring (or so the economists say).

All this means that Britain’s attitude to spending is super cautious, as I wrote last week. We aren’t spending because we guess (rightly) that we will be paying more in tax, in mortgage payments and in things like POWER and FOOD than we might have expected.

What is more, the good news that borrowing costs are falling for the Government are not good for pensions. Annuity rates will fall if bond prices increase , surpluses that are at all time highs will recede if gilt yields continue to fall. In fact, low borrowing costs for the Government mean austerity for everyone – even pension schemes claiming record surpluses, as ISIO claimed surplus for LGPS yesterday.

The reality of this terrible economic mess that everyone says Britain is in , is that it has been very good for Britain’s pension schemes. They have enjoyed the upside of markets that have risen against all expectations and gilt markets that make pensions cheap (if you are an accountant or actuary using an accountant’s model).

But the markets hope that yields will fall and hurt pensions, hurt annuity rates and mean that Britain doesn’t have the money in its pocket to spend (other than pay taxes).

This is the alternative to a growth economy, this is the economy that grew at a measly 0.1% last month and shows no sign of growing any faster , so long as Mrs Reeves behaves like Mrs Thatcher and is fiscally prudent as she is hinting she will be next month.

My world where mortgages are paid off, pensions are in payment and linked to inflation , where annuities are the likely outcome of our DC saving and where pensions are revolting against mandation of investment in growth stocks feels ok (if I am being oldish and selfish).

But I don’t feel good because I don’t see anything about what the market calls “good news” that feels like investment in Britain, I just feel threatened by higher taxes and mortgage rates for my children and less prospect of surplus to be paid to the next generation who have been short-changed by DC pensions.

Public spending cost cutting , increased taxation , higher rates of interest to make the Chancellor look fiscally prudent is not a formula for economic growth for this country or for the long-term prospects of pensions either. We have a contracting prospect of winning unless we see pensions investing back in Britain.

It is not good to have LGPS holding £147bn in surplus and councils being strapped for cash (partly because they pay huge contributions to LGPS and other public pension schemes). It does not make sense that the PPF holds a £16bn surplus (though it has stopped demanding more levies), what is it doing with all that surplus?

It is not good that companies are not getting access to the pension surpluses they have so they can invest and grow (instead saving surplus  to pay a premium on pension costs to get into a de-risked annuity buy-in/out).

In short, we in pensions are so caught up in worries about whether gilt yields should be higher or lower, that we quite forget that we need to pay money to pensioners, take as little from the pockets of employers as we can and fund the future payments of savers into DC plans who are short-changed by the DB pensions being gilt-edged.

The long term answer for the generations a long way from taking pensions is the prosperity that Britain felt itself in when it was growing , but that has not been for the best part of 20 years.

The fiduciary mantra I heard repeated session after session in Manchester is prudence. Well prudence is the fellow of austerity and that is what it looks like Britain is heading for. We may miss out the opportunity to do with our pensions and their surpluses what we should be doing so that we have locked in DB payments through insurance but I would rather Britain was keeping gilt yields high as we invested for the future and with it pension schemes carrying on and investing in our country (mandated to or not).