Just before the bank holiday weekend, Mark Dampier rather put the cat amongst the pigeons with the view that markets are 'too dangerous' in Money Marketing.
It’s worth a chunky quote.
“Too many use the last 40 years, which has basically been a long duration bull market, to tell investors that history is on their side. Yet with asset prices and valuations way higher than 40 years ago, this doesn’t seem likely.
“In the early 1980s the S&P was on 7.5x compared to about 19.5x today. Where would you prefer to start your investing career from?
“The US is also the lead market and economy. So merely moving more assets to a different market doesn’t necessarily protect your investors.”
Much to ponder.
In the Money Marketing podcast Financial Technology Research Centre founder, Ian McKenna and Chet Velani, chief executive of EV, suggest that artificial intelligence could pose moral questions for advisers.
And, no doubt, business dilemmas as well.
Advice firm Heron House underwent a significant transformation – it became employee-owned in 2020, but it is the view from planner Liam Flower summed up by the full headline ‘We turned down a sale because we didn’t want price hikes’ that perhaps tell us something significant about current dilemmas in the market.
There isn’t a huge amount of news in this month of bank holidays, so for our final entry we thought we would look in detail at a bit of furore in workplace pensions.
If you talk to anyone on that side of the fence – which of course includes a proportion of IFAs who do WPS work – they likely have one wish – leave them alone!
That may sound a little dramatic – but generally they want government, opposition and thinktanks to stop coming up with new wheezes for their members’ money. It is after all their members’ money.
Now, amid all the talk of cajoling the UK’s workplace pensions sector to drive – variously – growth, the energy transition, net zero and even levelling up, the Tony Blair Institute wants to convert the Pension Protection Fund into a £400bn superfund, as the Times reports.
This includes somehow merging it with Nest and many other pension funds as the FT reports. There is opposition from the industry and some consumer advocates such as the Financial Inclusion Centre’s Mick McAteer.
The original report is here – A New National Purpose: Innovation Can Power the Future of Britain (institute.global)
And here are the specific recommendations –
Incentivise consolidation in the UK pensions system. The DB system should be consolidated from over 5,000 schemes to 100 or less and the DC system should shrink from over 27,000 individual employer schemes to a smaller set of master trusts. To encourage consolidation, the pension capital-gains tax exemption should only remain for funds with over £25 billion under management and that allocate 25 per cent of their funds to UK assets (for example infrastructure, equities or growth companies).
Technical recommendation: By combining PPF and NEST to create a single investment vehicle that participates in market consolidation, the UK could create a £100 billion UK Pension Plan Investment Fund with a mandate to invest 25 per cent of its assets in UK infrastructure, equities and growth companies. The fund should be managed independent from government oversight.
Interestingly, the idea of creating a strategic state may make some sense in energy and transport for example, but I also think there is some danger with trying to get pools of invested money to achieve different things – all at the same time.
That strikes me – as someone who’s been around for a few years – as echoing the sort of mistake that big life offices made in the late 1990s and early 2000s, with the same pools of money serving very different investment, pension. mortgage payoffs and insurance objectives with decidedly mixed results. (the Prufund may be an exception)
More broadly, this sort of debate, takes away from what would otherwise be some rare wins for pension policy such as the fact that Nest now has £30bn under management.
It is actually moving more money into illiquid assets, something funds of such magnitude can do. But it’s probably best not to distract it by merging it with anything.
For now, it is one for IFAs to watch, as lots of 'clever, clever' plans are made for pension monies. Nothing yet seems to involve advised portfolios specifically. But there could be moves to cajole small employee schemes of various sorts into larger ones - perhaps on the Dutch model (my reading). But you can see how clients with some DB or DC workplace investments, might start to ask a few questions about what on earth is going on, and rightly so.
