The head of investment giant Schroders has warned against meddling after Labour unveiled interventionist plans to dictate how pension funds invest £50bn.
Chief executive Peter Harrison says that retirement scheme managers must not be inhibited in selecting investments amid a wider backlash over the unintended consequences of restricting investment decision-making.
Writing in The Telegraph (below), Mr Harrison said that “we need a change in our whole investment culture” if Britain is not to fall further behind on the global stage.
He added: “We need to ensure their pension managers are not inhibited in selecting these investments on their behalf.”
It comes after the think tank the Tony Blair Institute on Monday called for thousands of UK retirement schemes to be merged into just half a dozen £400bn superfunds to turbocharge investment in businesses and infrastructure.
Labour MP Rachel Reeves, the shadow chancellor, has also backed proposals to create a £50bn “future growth fund”, with every defined contribution pension fund forced to divert 5pc of their assets into it.
Why not change the incentives to invest – say, restore the dividend tax relief – and just watch the money flood in?
Does Mr Harrison take a similarly lofty view by refusing to countenance ESG ratings or are some restrictions on investment decision-making more acceptable than others?
How about diverting 5% of all the money currently being paid into defined benefit pension schemes?
ESG investment is voluntary, and there is relatively little actual money in these funds. It is generally state or state adjunct money that uses ESG restrictions because politics is more important than returns to them.
Obligatory asset mixes/restrictions are a problem because one size does not fit all.
Obligatory diversion of moneys to where it wouldn’t voluntarily go is theft.
Oh and the thing about the existing “Superfunds” is that they get split up into smaller sized funds, sometine very small funds (see the list of managers looking after Norway’s oil fund for example). Big funds move markets, there also comes a point where even the very few good investment managers have to close their funds to new business.
So stealing money to do something stupid. SOP I suppose.
It’s so much better to have politicians run everything. They’re so good at setting and enforcing targets, it’s always a success. Just look at the finest health service in the world, or the NHS as we unfortunates who have to suffer it call it in our more polite moments. Pay doctors peanuts but make sure diversity advisers are top quality by paying them £127,000 pa. Pay GPs based on the number of patients on their books, rather than how many they actually treat successfully.
Maybe market based healthcare would not have a 10,000,000 waiting list but then you’d have the mental anguish of knowing some fat capitalist was making money out of your cancer and how horrible would that be? Mind you. you might be cured of the cancer, but then you’d be mentally scarred for life…
Am I alone in finding it funny that one of our dimmest PMs is associated with a “think tank”?
They should rebrand it as a “low cunning tank”.
I wonder what happened when Labour forcibly merged all the UK computer companies…. and forcibly merged all the car companies…. and all the steel companies, and all the railway companies, and all the coach companies, and all the….
@John – Schroders is cheerfully abandoning its fiduciary duties in favour of ESG bollocks. In fact, its head of property publicly stated that profit should be secondary to environmental impact for real estate investors.
I hope this tax also includes the notional pension funds belonging to civil servants. Perhaps we should tax their benefits an extra 5%?
How about diverting 5% of all the money currently being paid into defined benefit pension schemes?
Nicely vindictive idea as it is, Jim, don’t think it would make any difference. It’s the benefits that are contractually defined. It’s not the beneficiaries who would suffer.