Con Keating
This is a comment from my recent blog on the BOE and PRA’s open criticism of the DWP’s arguments for CDC.
The most important criticism of the BoE pension fund is that it is not aligned with the government’s growth agenda as can be clearly seen from its asset allocation. Indeed that allocation is sure to deliver lack-lustre returns for the scheme (really not much different from deposit rates) and do little or nothing in terms of promoting economic growth.
It is not from me but from Con Keating, a man who has worked his life to get productive investment from pension funds. He is still doing so and helping the Government with its growth agenda.
If we were to keep our retirement funds in cash and gilts we would quickly find Britain falling behind everyone else because we would not have the growth we have to meet the rising costs of an aging society.
The costs of the NHS are rising, the costs of the State Pension are rising. Though not at the same scale, the cost of pension regulation is rising because we insist on giving our pensions to insurers who need regulating by the PRA and BOE as they throw our pensions onto slow boats to Bermuda.
The agenda of the BOE was clearly different from that of the Government this month when its Governor openly criticised Torsten Bell , the Treasury and the DWP for demanding a reserve power to mandate productive investment from our workplace pensions.
The DWP and Treasury would not need to do so , if there was consistent support from the BOE and PRA but there isn’t. Here again is what the BOE invest the £3.5bn in its pension fund in. This is not a scheme in the end game, this is a DB pension scheme open to new members and offering accrual to all members at work at the Bank.
I don’t see anything in this portfolio that could be classed as investment in UK growth.
A lot of cash
Like Con Keating I agree
“that allocation is sure to deliver lack-lustre returns for the scheme (really not much different from deposit rates) and do little or nothing in terms of promoting economic growth”.
No wonder Andrew Bailey is opposed to mandation. If his scheme’s allocation were tested as a workplace pension scheme for compliance with the Mansion House Accord , then its trustees would be made to invest a little of its allocation to growth, in something other than “Overseas Pooled Investments”.
There are real questions to be answered by the BOE and its regulatory arm – the PRA. They have been allowed to act above the law that governs the rest of us. The law of growth in productivity seems to mean little to the Bank of England. But it has convinced Pensions UK commenting in the FCA
“We agree with the governor of the BoE that the best route for increasing pension fund allocation to UK investment is for the sector to work in partnership with government on a voluntarily, market-led basis and in a way that is consistent with member interest,”
said Zoe Alexander, director of policy at Pensions UK trade group.
Maybe a few people criticising mandation – should question their position,