Why does this concern me? As I have long explained, pension saving is not the basis for a pension system unless those savings are very carefully directed into the creation of long term value that has the ability to create inter-generational transfers of value. The stock market, into which many of the funds of 18 year olds will be directed in the future, not only lacks that ability, it does not even aspire to have it. Instead, it is simply a short-term focussed den of speculative gambling that plays little actual role in real wealth creation, but which requires a steady flow of new inward funds to disguise the fact that fund management charges would otherwise deplete the value of the system as a whole. It is, in my opinion a Ponzi scheme, in other words.
As I pointed out recently, he almost got it then shied away from the implication.
Oldsters have to be able to sell their assets to youngsters so that they can eat their capital as part of their pension. OK. That means that those assets – shares in BP say – have to be sold to someone. Say, the young starting out in their pensions savings.
Pensions capital is actually that pig moving through the python of the economic system. Savings are not a new addition of capital to the system, they’re buying the old savings off the old. Sure, there is addition – if the population of the young rises, or their savings do, or their incomes. But the function of all these second hand bits of paper is to allow the old to eat their capital by selling it to the young as their savings.
And absolutely nothing, nothing at all, in Spud’s pensions ramblings manages to grasp this. The reason there#’s so much second hand paper traded is beccause this is how pensions systems work.