Sorry Richard? You what?
In 2003 I co-authored a paper with Colin Hines and Alan Simpson MP called People’s Pensions: New Thinking for the 21st Century. It was published by the New Economics Foundation and attracted some attention at the time. In it we argued that less than 15% of the total amount paid into pension funds was used to fund new investment in companies or buildings, whether for commercial or public purpose. The rest was used to fund stock market and other speculation. That speculation was used to fund the City of London, the financial services industry and the excessive salaries paid within that industry which had led to the over heating of the economy of the south east of England.
We argued that this was irrational. To invest 85% of pension funds speculatively rather than to use them to create new assets needed by either the private public sector was absurd, and represented a form of institutional gambling. This we said underpinned the UK’s private pension provision, and the crisis within it because it was irrational to place people’s long term savings in the hands of those interested in short term market movements. In addition, the process was almost wholly unproductive as most new saving did not go into new investment in real things such as industrial investment but was instead used to purchase existing shares, a process that simply moves money from one financial institution to another, and from which the company that issued the shares does not benefit.
Erm, no, you can\’t be. Not really…can you? Are you seriously suggesting that a secondary market in shares (or anything else for that matter) is unproductive? You don\’t think that the market in second hand cars aids the market in new ones?
So, if IBM comes to market (or decides to issue new shares, no difference) you\’re suggesting that I should never be allowed to sell them? For that\’s what the absence of a secondary market means. Further, if IBM decides to issue those new shares, how do we know what the price is if we can\’t buy and sell the old ones?
Now perhaps you\’re not suggesting that such a secondary market should be banned, just that it\’s unproductive: but don\’t you think that enabling me to sell my investments as and when I might wish to is productive? That finding the price of those shares by others doing so is productive?
You know, I really do think that Murphy does believe these things add no value. For his suggestion for "People\’s Pensions" is that instead of investing in the stock market or anything like that, we should have pension funds which, in effect, fund PFI style buildings like hopsitals and so on, the return coming from the rent paid. As he says, these will be for 30 years or more, such contracts, and thus are suitable for pension savings.
Erm, really? But how do I get out of such a project if I want/need to? I retire early through ill health say. As the plan says, this is something that needs to be sorted out.
establishing the rules on how pensioners are paid by People’s Pension Funds, what happens if they want to transfer their funds or die before retirement.
I would make the suggestion that you could solve this problem by having a secondary market in such investments but of course that wouldn\’t work because as we know, secondary markets are almost entirely unproductive, aren\’t they?
And this man advises the TUC?