Rachel Reeves’ £50bn pension plans are ‘dangerous and misguided’ | Personal Finance | Finance
Rachel Reeves‘ plan to order pension funds to invest part of their multi-billion pound assets in Britain are “dangerous and misguided”, the Chief Exec of a leading financial advisor has said. The Chancellor is expected to announce a voluntary code which would see the UK’s largest retirement funds pile 10% of savers‘ money into unlisted assets by 2030. Then 5% of that would be committed to Britain.
Critics have accused Ms Reeves of risking savers’ money in her bid to turbocharge Britain’s sluggish economic growth. Nigel Green, Chief Executive of deVere Group, said: “This is a dangerous and misguided policy for retirees. The purpose of a pension fund is to grow wealth for savers over the long term.
“That means investing wherever the most compelling returns are likely to be found and not according to Government diktats designed to patch over domestic political pressures.”
He warned that forcing pension funds to tilt portfolios towards one place without considering market conditions could distort asset allocation, reduce diversification and expose millions of future retirees to lower performance.
Riz Malik, Director of independent financial advisers R3 Wealth, told the Express the Chancellor’s proposal would set a “dangerous” precedent.
He said: “Pension funds exist to deliver the best outcomes for their members, not to serve as Government policy tools.
“Incentivise investment in UK assets by all means, but any form of compulsion would set a dangerous precedent. Trustees must be free to act solely in the interests of savers.”
Wealth manager and chartered financial planner, Joshua Gerstler, from The Orchard Practice, said boosting growth is a worthy goal, but forcing pension funds to allocate assets based on geography rather than the merits of an investment would risk compromising millions of savers’ long term returns.
He told the Express: “Pension trustees have a legal duty to act in members’ best interests and that means prioritising diversification and performance over political agendas.
“Mandating a UK allocation could lead to suboptimal outcomes if attractive opportunities aren’t available at the required scale. Encouraging investment is one thing – enforcing it is quite another.”
Shadow Chancellor Mel Stride has also sounded the alarm about the proposal, telling the Financial Times the suggestion pension funds should be compelled to invest in what the Government wants them to “is very concerning”.
The Government has said it will not provide a running commentary on the proposals. Now at its final stage, a review into pension investment is to consider whether extra intervention may be needed by the Government to make sure the reforms benefit UK growth. Its recommendations are set to be published this spring.
The commitment from pension funds would see about £100billion of UK pension savings poured into unlisted assets by the end of the decade. Of that, £50bn would be invested in Britain.
Designed to build on the Mansion House agreement under former chancellor, Jeremy Hunt, the policy aims to boost growth by devoting at least 5% of workplace pension savings into unlisted equities by 2030.
