I spoke at the Pension PlayPen meeting on Tuesday ab0ut how our hour long meeting with a number of senior pension professionals on it, had failed to talk once about the opportunity the Budget gave Rachel Reeves to kickstart growth.
It seems that so pre-occupied by the fiscal measures in the Budget , that we have lost sight on the capacity we now have to invest in our country. The FT find a new topic to moan about, sounding like I did on Tuesday! If you don’t believe me – watch from minute 50 of the video available here.
If I were Rachel Reeves I would rather friends in the bond markets than in the pension markets and her vulnerability to the criticism that her budget was “front-end loaded”seems a little too obvious.
She isn’t worrying the bond markets, especially gilts, as Truss’ and her budget worried them. There are no liabilities that the bond market underpins in DC – nor will there be in CDC, the people who underwrite pensions as we play the end-game are savers not trustees and sponsors. Nor need Reeves and Bell worry about long-term debt which is falling.
This looks like a bond market that is having a little more confidence in Reeves than it did have a couple of months ago, something that Britain needs if it is to see its books balanced.
My personal view is that what Torsten Bell did at this Budget was to reassure the markets that a Labour Government can play the game, can reassure before moving forward in what will be the second half of the Labour Government’s term.
Pensions will have a big part in this. I have spent the past couple of days with the LGPS people who have been very cocky about the surplus in the funds up and down the country. For all the worry coming from the right-wing papers, I did not any great sense of disquiet coming from LGPS or USS or Railpen who were represented in Penny Hill Park , in leaf-falling Surrey. For me it was time to take a view on what CDC can learn from successfully managed DB, which has no reliance on salary sacrifice. What is left of our DB pensions can take an easement in the long-term bond markets so long as it has a Government that can support its sponsors, councils and council-tax payers. I saw no sign of desperation about council tax and the sponsoring of LGPS.
Why should Britain moan?
Britain is not yet secure enough for a growth Budget, it will have to pay more tax for the rest of the decade to balance the books and it will do so through frozen rate thresholds.
2026 will be a year of preparation for growth and part of that will be a year getting ready for a new kind of pensions. I saw what those pensions could look like in terms of investment at the conference I have been at the last two days. It is one that is deeply intent on growing the economy in Britain, hat-tip to Will Hutton who finished the event in the growth vein that he brought to the Pension UK conference earlier in the autumn.
Britain should not moan, it should get on with saving as it can (still using salary sacrifice for three years). In the meantime , its pension industry should be taking on the growth agenda as LGPS are doing and our DC pensions should do as they move into whole of life and at retirement CDC.
