There are many reasons for those working in the City to feel concerned. There is a log in any signs of recovery that our public markets are recovering, we are going through a lag in recovery in house prices after the pounding the housing took in the second half of last year. Our pensions have been raided by those older than 55 anxious about tax privileges being taken from their private savings. Politically, the Conservatives, seem to have turned into the party of the posh and a party of failure.
We have not got behind the Labour party as our party of financial revivification and that is what needs to happen , in my opinion.
This morning, our Chancellor will deliver a speech that she and this Government believe, should give us finance folk – courage.
Rachel Reeves will today (on Monday) argue the City of London is entering a “new golden age” thanks to changes in tax and regulation that smooth the path for companies to raise money in the UK.
After a long-running dearth of UK listings, bankers are cautiously more optimistic about the prospects for this year and the chancellor is keen to seize on any evidence that her push to ease restrictions on the City is leading to a pick-up in activity.
While pensions is a step away from City trading, we are the driving force behind the City’s optimism and frustration. For nearly two decades, pensions are sending negative signals to the City as a place of investment. Pensions have been taking money from UK equity markets and reinvesting in gilts and corporate bonds as DB pensions “de-risk”. Pension saving has been into DC plans that invest passively around the world to a point that our largest DC plan (Nest) has only 4% of our money invested in UK equity markets.
I think that things have to change and that the message is at last getting through. We have recently seen the clampdown on DB pensions by insurers promoting bulk annuities, being challenged. We are seeing consolidation of DC plans to a point where they can take an active stance in investment. We are seeing the opening salvo from the Royal Mail CDC plan, at last being echoes by employers who want to see pensions invest in UK stocks ( not least their’s).
Of course this is a very cautious optimism at the London Stock Exchange and similarly in Pensions UK and the various organisations that represents trustees, financial service providers, sponsors and (in future) proprietors. The weight of money to be made is still in “de-risking” and consultants, insurers and large employers are still referring to buy-in and then buy-out of occupational pensions as “gold-plated”. They have been encouraged by the praise offered to American private equity firms buying into the process by snapping up PIC, Just and most recently Utmost. Praise came from Rachel Reeves, at an unpropitious time for a process that was already moving towards growth.
We cannot have it both ways and I hope today, that our City fathers will listen to a Rachel Reeves more in tune with the speeches I have listened to by Torsten Bell. Torsten Bell, our pension manager has shown courage in his exhortation to a hall full of pension investment leaders in Edinburgh last March.
“Get real”
We need to invest in the UK. This is the message this morning from Rachel Reeves. We need the whispering of our Prime Minister to the United States to become louder. We need to assert ourselves at Davos, all this is big politics but it needs to be backed up by the fortitude and determination of those managing money and in particular, those of us managing pension money. We need to get real about Britain’s potential to grow.
We will hear today that financial services is doing well – hear it from our Chancellor. We have heard the same from our Pensions Minister. We now need a determination amongst those managing pension funds, advising them and those building new structures , to make it clear that we will “get real” and “get growth” into the British economy.
