There is a battle being waged over the control of the UK’s pension savings, affecting the retirement pots of 22 million people saving into a workplace pension scheme.
The government is trying to push through legislation (the Pension Schemes Bill) which, among other things, would give it the power to direct pension scheme trustees over how they invest members’ savings. It would enable the government to force investment into the UK and into specific types of project, selected by the government in aid of its agenda for economic growth.
The leading pension trade bodies, the Association of British Insurers and Pensions UK, have both written to the pensions minister Torsten Bell politely suggesting he should back off. They have pointed out that there already exists a voluntary scheme whereby pensions will invest in UK growth projects, but only where trustees believe it is in the interests of members.
The Conservative shadow pensions secretary Helen Whately is also campaigning against this state interference.
The pensions minister Torsten Bell is under pressure over proposed government control of workplace pension investments
ALAMY
It’s not just the obvious problem that once you override pension trustees’ fiduciary duty to do the best they can for their members, you have crossed the Rubicon. You’re in territory where distorted priorities lead to lower pension investment returns in pursuit of political ideology.
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There’s also the fact that you’re directly interfering in the mechanism that has transformed the standard of living of billions of people, including pretty much everyone born in this country over the past 250 years.
It’s not just the present government we need to worry about. How would you feel if Zack Polanski became prime minister and had the power to dictate where your pension savings were invested?
Lawmakers are seeking greater control over how retirement funds are invested
ALAMY
It is easy to forget that between the end of the Roman Empire and the late 18th century the standard of living in this country barely rose at all. Then something miraculous happened. The industrial revolution was born of the growth of free trade.
The ability of individuals and businesses to freely trade goods and services, entering into transactions of mutual benefit, is what has delivered the prosperity we enjoy today. It led to the economic growth that has made us all better off.
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Economics is about the employment of scarce resources that have competing uses. It is the free market and the millions of daily transactional decisions the free market entails, entered into for the benefit of all involved, that determines how resources can be best employed.
The result is the extraordinary economic flourishing that today underpins and pays for the public services and the standard of living we all enjoy. This only works, though, if you don’t interfere.
Industry voices warn that interfering with trustees could have long-term consequences
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Every time a politician or regulator imposes a price cap, a wage or rent control, or directs capital in a particular way, the result is lost economic growth. This is not to say that we don’t need any regulations, but they should be kept to an absolute minimum and we certainly don’t need some cocksure pensions minister giving himself the powers to dictate where our pension funds are invested.
He should heed the warnings of the pensions industry and the political opposition and think again, for all our sakes.
Tom McPhail is a pensions commentator with 20 years’ experience across the industry