The old ones are the best ones, eh Ritchie?

Murphmonster rolls out his old idea that pensions shouldn\’t be invested in anything that currently produces a return:

Most importantly we suggest that if those pension funds are to attract tax relief in future they must use a significant part of the £80 billion of contributions they receive each year to invest in new jobs, new technology and new infrastructure for the UK so that the wealth that is needed to grow our economy, to create jobs and to build the real capital base that must be passed to the next generation is built on the back of pension fund investment.

No, no, far better that your pension savings be used in the riskiest part of the investment business. Venture capital.

Does he ever actually think about what he\’s proposing?

14 thoughts on “The old ones are the best ones, eh Ritchie?”

  1. You ignore the obvious fact that this is a moral question. As I have argued elsewhere all rights, including human rights, are conditional on paying the right amount of tax.

    The State provides them so it can deny you these rights if you don’t pay the correct amount of tax.

    For pension contributions to receive the privilege of being free from tax, they must be deployed in a moral manner. What is moral is decided by The State. Which is why I, as a Tax Campaigner of Courage, am entitled morally and legally to say what should be done with pension contributions.

  2. Mrs Murphy is guaranteed an NHS pension and neither Tax Research LLP nor Tax Gap Ltd report any pension provision.
    So the answer to “Does he ever actually think about what he

  3. Mutter, mutter
    about what he is proposing” is probably “Yes”. He is spending our money that we have saved instead of spending in order that we should not in our old age be dependent upon his “Courageous State” but none of his own. Possibly to ensure that we *shall* end up dependent upon the bounty (or otherwise) of IngSoc.

  4. ‘invest in new jobs, new technology and new infrastructure for the UK so that the wealth that is needed to grow our economy ..’

    Isn’t that exactly what pension funds do already, albeit by buying shares in companies that do fulfil each of those requirements ?

  5. Seems to be the usual Keynesian fallacy; you know, every pound the State spends is “investment” with an enormous ROI via the “multiplier” whereas every pound the private sector lends is wasteful speculation by animal spirits on the creation of useless fripperies.

  6. When you are 100 years old the mind goes a bit fuzzy, but I do believe the Trustee Investment Acts are still in force?

    So RM wants someone to stand up on their hind legs and repeal them, proclaiming that due care is no longer a prerequisite for investments for life.

    Actually, I’ve just realised that, after the recent EU shennanigans, this won’t be a problem at all. He just needs to turn over the nearest stone and find a dodgy politician who’d be delighted to do it.

    Oh well, I’m just glad my pension is with the Estate Agents and Second Hand Car Dealer Alliance.

  7. Pension Funds are “other people’s money” so, obviously Socialists think they should get to spend it.

  8. @worzel

    “Isnt that exactly what pension funds do already, albeit by buying shares in companies that do fulfil each of those requirements ?”

    Actually, no. Or, at least, not especially much. The companies themselves don’t see any of the money spent on their shares.. it’s all second hand paper trading. That does have some use, of course.. eg. if I buy a share so I may retire in 20 years, I may be buying it from someone who is retiring now having bought it 20 years ago.. so my cash is his pension.

    However, whilst his solution is a load of statist bollocks, RM is looking at a genuine problem. There’s a lot of money pumped into pensions, and far more of it goes into pumping up asset prices than goes into actually investing.

    Some money does find itself able to do useful things, of course. A lot of pension money goes into bonds.. and money lent to companies does actually get spent by them. Further, many schemes (and funds invested in by schemes) will invest in Private Equity or other areas where there is ‘real’ investment.

    I’ll be frank, though, when I look at pension schemes (and the stock market in general), I really don’t like the look of it.. and, with a view to my future, I’m somewhat spooked. The only reason I can see for market valuations as they stand is that we’ve created a fuckton of money, and there’s nowhere else for it to end up. For most of us, it’s the best on a list of really shit options.

  9. Seems to be the usual Keynesian fallacy; you know, every pound the State spends is investment….

    How about an agreement? Those of us who are vaguely left stop referring to everything we disagree with as neo liberal, and those vaguely right stop referring to everything they disagree with as Keynsian? Ok, murphy will never abide by it, but we can do better than him.

    The proposal is wrong not because it is Keynsian (if indeed it is) but because it advocates putting future pensioners money in what are not the best risk adjusted assets. Govt (or gubmnt if you prefer) may decide to invest in infrastructure or whatever, and pension funds can decide whether to invest in gubmnt bonds, but that is their decision.

  10. @The Thought Gang

    I think you fail to understand the importance of the secondary share market.

    If there was only a primary share market, then the only possible type of trade is that a company sells me a share, which I keep forever, and hope I get enough dividend income to justify my investment.

    This means that shares become of interest only to long-term holders.

    Obviously this would significantly depresse share prices compared to a world with a secondary market where investors can unload their positions at any time. Thus both companies and investors benefit from a healthy secondary market – investors because they have more control and companies because their initial share issues get them much more cash invested.

  11. @ TTG
    Most new employment is created by small enterprises (except during Socialist governments when the odd million or two is hired by the government to produce nothing). Occasionally a big company will launch a “Rights Issue” to finance a major expansion to increase employment and production but mostly the impact of pension schemes on investment is through 3i and its competitors who supply capital to growing companies pre-listing and through the incentive of cashing in through an AIM float that encourages entrepreneurs to launch high-risk ventures that are far too small to attract pension fund investment at outset.
    One reason why I like the latter is that pension fund investment is steered into the ones which have semi-proved themselves, skipping the superficially plausible nonsenses; a second is that investing in businesses worth

  12. @ theProle

    Don’t misunderstand me. I know that the secondary market has a useful purpose. It’s just that the point isn’t to raise money for the companies to invest in generating future income. I might agree, however, that the pursuit of a rising share price, and incentives based thereon, do focus companies on finding otherwise unrelated ways to generate future income.

    @john77

    Indeed. It’s probably a shame that so much private equity is out of reach of the common man.. that’s where the true opportunities for growth ought to be. Although, having said that, they’ve been through tough times too… but I wonder how much of that has to do with them leveraging investments up to the eyeballs with bank debt, driving short-termism.. and how much of that might be avoided with a more funding available for equity?

    I’ve worked in a private equity portfolio company, and the amounts handed over to the bank in fees and interest.. for the lowest risk on offer.. comfortably outstrip anything you could dream of getting from mainstream investments.

  13. He also misses the point that the point of concessional taxing of pension funds is to encourage that investment, and compensate you for locking your money up where you can’t access it till a certain age.

    I don’t know anything about the UK system, but that is indeed how it works in Australia.

    So to then use that tax concession as justification for forcing you to invest in certain ways is unfair.

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