Ritchie on pensions

Second, people want certainty and pensions do not give it. I have long argued that infrastructure and employment generating bonds provide such certainty. I still think if people could invest in their local communities they would, and likewise if they could invest in the NHS – which they know they will need in their old age – they definitely would. The rates of return paid could be a lot lower than PFI and still provide a fortune in savings for public sector infrastructure costs and a fair return to pensioners.

Third people want to invest in housing and we need a lot of it: social housing funds could be the basis for pension arrangements for a long time to come and provide enormous social worth to the UK.

Rightie ho.

Will this happen? I doubt it, very much.

Should it happen? Yes, I think it should and I very strongly suspect many of us would be very much better off as a result, including all those about to be enrolled in new state sponsored pension arrangements that will all be ‘invested’ in conventional stock market based portfolios and no doubt will be lost for future generations of pensioners in this country as a result. Such arrangements belong to the past and simply fatten the City at cost to the rest of the economy.

A slight problem here.

Who or what is this “City” referred to here? Why, The City is the name we give to the assembled financial experts who allocate savings around the economy. So Ritchie’s arguing that we must take that function away from the people who currently do it, and make sure that the money is invested into infrastructure projects and social housing. And the people who do that allocation will undoubtedly be entirely different people from the people who currently do the capital allocation of putting pensions savings into houses, stocks, bonds and projects.

Entirely different people doing an entirely different thing. No doubt about it.

This is at least better than his suggestion that 25% of pension funds must be invested in new businesses: that would mean turning it all over to the venture capitalists.

And, seriously, who in buggery would suggest investing in bonds over a 30 year time scale? Hasn’t the bloke ever heard of inflation?

24 thoughts on “Ritchie on pensions”

  1. “Third people want to invest in housing and we need a lot of it”

    So he seems to know that there is appetite to supply such investment in housing, and he also seems to know that there is demand for such investment.

    So he knows there is both supply and demand for this, but he isn’t curious to wonder why the investment isn’t/can’t happen.

    You can lead a horse to water…

  2. “And, seriously, who in buggery would suggest investing in bonds over a 30 year time scale? Hasn’t the bloke ever heard of inflation?”

    Hmm. Haven’t you ever heard of inflation linked bonds?

    In which (I think) NEST (the default “new state sponsored pension arrangements for low earners) invests quite a lot. So he is still talking bollocks because there’s plenty of pension money being lent to government so it can do all the stuff he wants. No need for pension funds to become infrastructure funds – just buy linkers and let the government do NHS, etc.

    Unless he is saying gubmnt shouldn’t be trusted to do these things.

  3. ‘The rates of return paid could be a lot lower than PFI and still provide a fortune in savings for public sector infrastructure costs and a fair return to pensioners’

    So pension savers will be forced to accept lower returns than they are presently able to achieve via PFI investment, but the Lord High Denouncer deems this a ‘fair return’ for pensioners ?

    It would be really nice to get him into court to defend his investment advice

  4. “Third people want to invest in housing and we need a lot of it”

    “So he seems to know that there is appetite to supply such investment in housing, and he also seems to know that there is demand for such investment.”

    Sometimes I get very confused on this.

    What’s the “investment” we’re supposed to be talking about here. I would have thought creating housing then making lots of dosh by selling it for more than it cost to build or charging rents wasn’t what gave the Murphs of the world pleasant tingly sensations in the underwear region. Aren’t they supposed to be against this sort of thing?
    Or is this some other meaning of “investment”.
    As in laying siege to?

  5. I still think if people could invest in their local communities they would, and likewise if they could invest in the NHS – which they know they will need in their old age – they definitely would.

    Would they fuck. If you even suggest people pay a nominal fee to see a doctor, just to deter the hypochondriacs and time-wasters, they go apeshit and insist everything should remain absolutely free, i.e. somebody else should pay for it.

  6. if they could invest in the NHS – which they know they will need in their old age – they definitely would

    Ah – Murphy’s revamping the Liverpool Care Pathway now.

  7. “So Ritchie’s arguing that we must take that function away from the people who currently do it, and make sure that the money is invested into infrastructure projects and social housing.”

    Quite. But just because Richie can think of even worse things to do with the money, it doesn’t mean that those who currently do it are best for the job.

    So this is a topic I have some sympathy with him for. I don’t fancy his solutions much, but anyone willing to dream up alternatives to handing vast sums of cash to a bunch of rent-seekers who cream off a hefty slice for themselves, irrespective of whether or not they ‘beat the monkey’, will get credit from me (not, not *actual* credit).

  8. As a general rule do not give your money to someone:

    – who doesn’t care what happens to it

    – has no accountability for what happens to it

    – has no expertise in handling money

    These rules have been laid down by me after suffering a decade of Gordon Brown.

  9. “No need for pension funds to become infrastructure funds”

    But pension schemes and insurers currently *do* invest in infrastructure, PPI, social housing schemes etc, and the major annuity providers are looking to invest even more. It’s something I know a fair bit about, being a major part of my day job.

    They are actually quite a good match for pension liabilities (long-term, reasonably secure income streams, often some form of security).

    The difference from Ritchie’s proposal is that these investments are entered into voluntarily, at commercial rates and where returns are beneficial to policyholders.

  10. “So this is a topic I have some sympathy with him for. I don’t fancy his solutions much, but anyone willing to dream up alternatives to handing vast sums of cash to a bunch of rent-seekers who cream off a hefty slice for themselves, irrespective of whether or not they ‘beat the monkey’, will get credit from me (not, not *actual* credit).

    I’d have the same sympathy. But treating “investment” in housing the way Murph is, is simply perpetuating the system. The only way it can be an “investment” is if you keep “handing vast sums of cash to a bunch of rent-seekers who cream off a hefty slice for themselves, ” if you didn’t, property would be become a lot cheaper & Murph’s “investment” would be showing a bloody great loss. The only way to make housing affordable is to stop slinging money at it.

  11. Is this some entirely new meaning of ‘invest’?

    How do you extract a financial return on that ‘invstment’ without the NHS being – even in part – a profit-making entity, something Ritchie is against?

    Is he confusing ‘put money into’ with ‘invest’.

  12. @BiS

    “What’s the “investment” we’re supposed to be talking about here. I would have thought creating housing then making lots of dosh by selling it for more than it cost to build or charging rents wasn’t what gave the Murphs of the world pleasant tingly sensations in the underwear region. Aren’t they supposed to be against this sort of thing?
    Or is this some other meaning of “investment”.
    As in laying siege to?”

    You overestimate him again. Keeping it simple keeps you close to the mark I think:

    – He has just discovered externalities. He calls it ‘social worth’ or some such.
    – He figures the ‘social worth’ at play here is massive, and that the idiots who develop houses are missing this rare insight he has acquired.
    – Taking advantage of his genius insight, he can fool the idiot capitalist into building these houses; in their false consciousness they will miss the fact that the real gains will be appropriated by the State via these ‘social worths’.

    Courage and genius in one tightly knitted ball of policy. It’s so good it should be the Law. And that’s exactly what he proposes…

  13. Stuck-record

    You obviously do not realise that your taxes are already an investment

    The State has already wisely invests your money in the NHS* which will one day pay return to you an acceptable chance of receiving the medical treatment that you might need

    *Investments in the NHS are non-refundable and the investor may be required to make up the shortfall in any medical treatments that the NHS is unwilling to provide. The NHS takes no responsibility for the performance of your investment.

  14. What on earth is this ‘investment’ in the NHS? What would I get as a return after 30 years? Does he seriously believe people are clamouring to ‘invest’ their pensions in the NHS?

    The man is raving. What the hell is he raving about?

  15. “The only way to make housing affordable is to stop slinging money at it”

    Well no, the way to make housing more affordable is to sling money at building more houses. But that requires relaxing the planning system – as usual the problem is with the State.

  16. @Richard
    I refer to Gary, above:
    ” He figures the ‘social worth’ at play here is massive, and that the idiots who develop houses are missing this rare insight he has acquired”
    Problem being, you don’t actually need the “idiots who develop houses” to get the social worth of houses.
    There are people who wish houses.
    There are blokes who build houses.
    it’t doesn’t need idiots between the two making a great deal of money out of it.
    Worth remembering, almost the entirety of UK cities’ housing stock was created without developers or credit.
    So what Murph is proposing to do is collect rent like all the other parasites.

  17. Invest in the NHS?

    Well, it’s an interesting idea.

    Could someone just remind me how much dividend it pays?

  18. Perhaps he wants to privatise the NHS in a mass-shareholding model?

    Or maybe he just wants people to give the NHS their pension money… because monkeys stole his brain?

  19. “Second, people want certainty and pensions do not give it. I have long argued that infrastructure and employment generating bonds provide such certainty.”

    Yes, the certainty that you’ve just pissed your money away. The problem is, social engineers like Ritchie just see this big pot of accumulated savings and start having wet dreams about how to spend it. The fact that it isn’t their money doesn’t seem to matter.

    If the State mandates how pension funds invest money, aren’t they then responsible for the outcome? I can see this “certainty” devolving into an argument that it’s not the investors’ fault their money is gone and the State should cover the shortfall. *Cough* Social Security *cough*. What Ritchie really wants is to re-nationalise pension funds so he can spend the proceeds.

    “If you even suggest people pay a nominal fee to see a doctor… they go apeshit and insist everything should remain absolutely free”

    Ah, my co-national Tim N is unimpressed by the backlash in Australia to a proposed $6 co-pay for doctor visits too. Couldn’t agree more.

  20. @ Tim Newman
    I should not go apeshit at a nominal fee to see a doctor – what I foam about is car-parking fees at A&E hospitals which demand coins (in some cases £6 or £7 in coins which is more than I ever choose to carry) with no option to use notes or credit cards. The whole point of A&E is that one does *not* plan in advance to visit it and stock up with a purse full of coins. The NHS bureaucrats seem to think that if you don’t have enough change then you can carry your passenger from the municipal car park a mile away that takes credit cards (or, another hospital, find a gap between residents’ car in a housing estate with no off-street parking nearly half-a-mile away and carry him/her from there).

  21. John77, this is hardly surprising and sums up the mentality of the NHS better than any medical anecdote. My main problem with the welfare state isn’t that it costs a lot, or people freeload off it, it’s that it doesn’t help the people it is supposed to. If it doesn’t do that, it’s up for scrapping.

  22. Not only should there be a nominal charge for turning up at the doctor, there should be a nominal charge for not turning up either.

    It should increase gp’s productivity no end, but in more direct cash terms, the money wasted by people not turning up at nuclear medicine appointments runs into millions. Simply because the radioactive product is only good for you and for that day. That is just 1 example that I know of.

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