Sarah Mcnarey says:
December 30 2022 at 10:05 am
People do not want to invest in low rate, fixed income bonds to save for their retirements – it is a stupid strategy that is almost guaranteed to lead to worse outcomes.This is why, by choice, the allocation to long-dated, fixed income bonds for most people saving for their retirements is relatively low.
Forcing private sector individuals to invest in something that is inappropriate (for their needs) and economically sub-optimal, whilst public sector workers continue to enjoy massively subsidised DB pension schemes is a nonsense.
Unless you are suggesting that we should remove the unaffordable DB schemes from the public sector and instead provide them with DC contributions invested in your ‘Green bonds’ going forward?
Reply
Richard Murphy says:
December 30 2022 at 10:57 am
Politely, have you looked at pension fund asset allocations?The largest part is now always in bonds
The smallest in equities – and a tiny part of the U.K. equity market is now owned by pension funds
Professional asset managers clearly disagree with you, for good reason
Reply
1.1 General
In the United Kingdom, there is one main type of occupational pension scheme falling under
the scope of the IORP Directive (Directive 2008/41/EC). They offer defined benefit (DB),
defined contributions (DC), and hybrid plans (HY). Members of the DB plan have no exposure
to market risk. Members who have a DC plan, however, are fully exposed to market risk.1
At the end of 2017 (2017 Q4), 37 990 occupational retirement schemes submitted their
reporting package to the British National Supervisory Authority (NSA), the Pensions
Regulator. Overall, these institutions accounted for about 90,2% of the occupational
retirement schemes within the European Union (EU).
The United Kingdom occupational pension funds are largely focused on defined benefit and
hybrid pension schemes, which account for 79,1%2 of total pension fund assets, while the
remainder focuses on defined contributions schemes. Table 1 reports the amount of assets in
DB and hybrid pension funds by year end 2017.
Ah, yes, so that’s the defined benefit pension funds that no one can afford any more because they’re all invested in bonds – by law that is.
That’s a really great advertisement for the law insisting that pensions funds invest in bonds then, isn’t it?
Jesus the man’s stupid.
It would be difficult to explain to a Martian that, no, there isn’t a single leftover remnant from the ancient past, that represents a vestigial object of a failed evolutionary path that mostly extinguished itself by forgetting how to breathe.
Yes, really gznrxplinds, Murphy really is a human being…
Unsurprised to discover that the guy is such a raging egomaniac he was prepared to pay £11 a month for a blue tick on Twitter.
There is no law requiring DB schemes to invest in bonds. However, given the nature of the liabilities as well as the maturity and cash flow situation of these schemes, it makes perfect sense to do so.