And:
The question is, I think, appropriate. After all, if the opportunities to invest in the UK economy already exist and you’ve got £6,445,000,000,000 available to you, don’t you think you might already be undertaking all the worthwhile investments already available, with the money you’re already got?
Hmm.
While pension funds hold roughly 50% of their assets in gilts,
Ever heard the phrase “crowding out”?
I wonder if Spud supported this at the time?
“Back in 1997, they and other UK institutional investors owned nearly half of all UK-quoted shares. Now it is 4 per cent. And the answer? It was Government policy that pushed them to do so. The policy came in two halves: tax and regulation. The tax was Gordon Brown’s raid on dividends paid to pension funds. Until 1997, pension funds got a tax credit. So if they were paid £80 in dividends, they got back £20 as a credit. The rationale was that the company had already paid corporation tax and for pensioners at least there should be some sort of rebate”.
https://www.thisismoney.co.uk/money/comment/article-13041677/HAMISH-MCRAE-Time-fix-Gordon-Browns-pension-errors.html
While pension funds hold roughly 50% of their assets in gilts,
I was under the impression that organisations holding pension funds were obliged by law to hold a certain percentage in gilts. That’s why I’m happy to hold my fund in a SIPP where I don’t have to put up with such miserable returns.
BJ
I haven’t checked but I am guessing that the £6.4bn includes all pension funds? Ie, including DC and SIPPs (steered autonomously as you point out).
Probably makes no difference as the fat controller would see the whole lot as fair game in any case.
Aren’t . . . aren’t pension funds – aren’t they *already* invested in the UK economy?
This isn’t money sitting in the bank or under the mattress.
DB is about 1,500 billion and what proportion of that is in Gilts right now I don’t know. But LDI was leveraged Gilts so quite a lot. Schemes have wound back investment and move into Gilts as they approach the point where they want an insurance company to take on the obligations. At that point it’s about 50%
Those of cynical mind might even conclude the entire point of mandatory state pensions is to confiscate some portion of the working man’s income and forcibly “invest” it in the government at a below-average, and inflation-exposed return. Turning it into just another two taxes.
I was under the impression that organisations holding pension funds were obliged by law to hold a certain percentage in gilts.
I’m not up to date with pensions legislation, but in any case DB pension funds that are closed to new entrants (i.e. almost all of them) will need to invest heavily in gilts (and similar bonds) to match their future liabilities.
“ Aren’t . . . aren’t pension funds – aren’t they *already* invested in the UK economy?”
Not all. I have a proportion of mine invested in overseas funds for the same reason foreign pension funds invest in UK, diversity.
I also have it spread across low, medium and high risk funds rather than having it all in one (govt/Murphy) controlled basket.
Something Spud doesn’t seem to want to understand, a pension/saving fund is a portfolio based on the owner’s preferences.
BiND
+1
Diversity, lots of it. I’m already exposed more than enough to the UK. Never want too much in one basket.
AIUI under UK law (probably English law) pension trustees have a duty to manage their funds to maximise benefits to their beneficiaries (after taking their wedge ‘natch)
I am not sure anyone would argue the UK stock market is a good investment at the moment, and pension funds are probably already investing what they think is justifiable
I can see a lot of people moving their funds into SIPPs