While I aim to express my opinion respectfully, it seems Rachel Reeves may not yet have established herself as a proficient asset allocator. Nevertheless, the Chancellor plans to redirect retirement savings as part of an economic strategy, continuing a trend initiated by her Conservative predecessor, Jeremy Hunt.

Recently, the Treasury announced its intention to implement a “backstop” power, allowing it to mandate large pension funds to invest in domestic assets. This move is part of three proposed pension measures aimed at stimulating growth and supporting the faltering stock market. The additional strategies include consolidating defined-contribution (DC) pension schemes with local government schemes into larger “megafunds,” and facilitating access to defined-benefit (DB) surpluses.

However, the validity of these strategies is highly questionable.

While the withdrawal of pension funds from UK stocks has played a role in the nation’s low asset valuations and sluggish growth, it is not the primary culprit.

Significant factors include the global surge of the US stock market, the UK’s reliance on older industrial companies, and the residual impacts of the 2008 financial crisis alongside Brexit. Forcing pension funds to prioritize UK investments is unlikely to provide meaningful solutions and undermines the trustees’ fiduciary duty to act in the best interests of their members.

The “voluntary” arrangements introduced by Hunt and Reeves, which encourage pension schemes to allocate a portion of their portfolios to private markets and UK investments by the decade’s end, seem to set a precarious precedent.

While the case for consolidating DC funds is marginal at best, the risks associated with tapping into DB surpluses are apparent, regardless of whether trustees must approve these decisions.

Consider the “contribution holidays” taken by employers in the 1980s and 1990s, which led to significant deficits in the following decade.

Pension funding is highly volatile and sensitive to interest rates, as bond yields are used to calculate the present value of future benefits. Lower rates result in larger deficits, and the era of low interest rates from the mid-2010s has been challenging for defined-benefit schemes.

I completed my PhD on Sir Philip Green, who faced a £571 million pension deficit when attempting to offload BHS and ultimately contributed £363 million to address it. It seems part of Green’s rationale for holding onto BHS was his expectation of rising rates, which did not materialize for several years. Currently, DB schemes report £160 billion in surpluses, a figure that could diminish rapidly if the Bank of England implements aggressive rate cuts.

The government anticipates that companies with surplus funds will invest them productively; however, the Pension Insurance Corporation, which safeguards old DB schemes and opposes this plan, suggests that companies are more likely to distribute these funds as dividends.

Furthermore, most of these proposed changes primarily affect private-sector pensions, leaving public-sector pensions largely untouched. This is due to the fact that public-sector pensions are typically “unfunded,” relying on current contributions and taxpayer support rather than investment portfolios. Historically, the mandate to “buy British” may ultimately cost private pensioners.

Over the last decade, UK equities have generated an 84 percent return, whereas European equities have provided a 120 percent return, and US equities have soared to 277 percent, according to investment platform AJ Bell.

There is a growing momentum behind the idea of linking pension funds to political agendas, often driven by interests poised to gain from increased capital market inflows.

The metaphor of throwing the kitchen sink at the UK’s stock market and economy seems fitting; it suggests a reckless approach to addressing deep-seated issues at the expense of other stakeholders.

The current deregulatory push is part of this chaotic strategy. To use another metaphor, during challenging financial times, the growth agenda appears to overshadow more effective solutions, particularly concerning tax reform.

I have consistently advocated for broad strategies to promote investment in UK assets instead of targeted policies. The latter, akin to an economist manipulating the economy with robotic controls, rarely achieve the desired outcomes.

Implementing changes such as reducing stamp duty on shares, reinstating the dividend tax credit discontinued in 1997, abolishing energy windfall taxes, lowering capital gains taxes, reversing inheritance tax burdens on farms and family businesses, and easing restrictions on non-doms could enhance the overall business climate. However, each of these measures entails costs, which explains the inclination towards more desperate approaches. Despite current tensions, there is a notable cross-party agreement on these matters.

Heathrow’s Leadership Under Fire

A review conducted by Ruth Kelly regarding the shutdown at Heathrow in March revealed that the airport took appropriate actions following a major power outage; however, it noted that the chief executive was asleep during the crisis.

Thomas Woldbye was reportedly in bed with his phone silenced when the event unfolded on March 20, only waking to find 1,300 flight cancellations by 6:45 a.m., with his deputy making crucial decisions in his absence.

While it is important for executives to have time to rest, relying solely on a smartphone for communication is concerning for someone responsible for managing a critical infrastructure. Shouldn’t there be more secure communication methods in place, such as a landline or a direct notification system from an executive assistant? It indeed must have been a chaotic waking.

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