Hey Boris Johnson, that's no way to treat a pension fund

Sensible pension fund managers do not send their money where politicians tell them to

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The Independent Online

It sounds, I have to say, like the biggest raid on pensions since Robert Maxwell did for the guys at the Daily Mirror. And it emanates from a similarly larger-than-life, charming (when he wants to be) and charismatic man on the make: Boris Johnson.

Now Boris is honest, unlike Cap’n Bob. The Mayor of London is open about his scheme. Bozza would like to set up a cuddly, almost socialistic-sounding “Citizens’ Wealth Fund”. Into this fund would be poured billions of pounds worth of public sector pension funds.

From job centre managers to Treasury mandarins, from nurses to Boris’ spin doctors, their precious pension pots would be re-directed to various pet schemes of Boris and his chums. They would build houses, roads, power stations and airports with the cash. The returns will be magnificent and greatly to the benefit of the pension funds, to the wider nation and, of course, to politicians in a fiscal tight corner. Sounds too good to be true, no?

Of course it is. At the moment the pensions funds of teachers, doctors, university dons, DVLA staff and all the rest are invested in much the same way, and with much the same strict remit and safeguards, as those in private sector schemes.

That is to say, a judicious admixture of shares, property, company and government bonds. In most cases you will find them invested, for good or ill, in the likes of Toyota, Tesco, Vodafone and the United States Treasury; big, internationally-based companies or gilt-edged bonds. They have all had their ups and downs, to say the least, but they are all, at any given moment, known quantities to the investment community.

I’ve given those as examples quite deliberately, as examples of investments that can, short-term, show great instability and turbulence; but which can also show decent returns over the longer term. Besides, most sensible fund managers spread their investments over a much wider field than that.

 

What most sensible pension fund managers do not do is send their cash to where politicians tell them to. If they do invest in the public sector, via PFI schemes, they do so via specialist companies and private equity vehicles who have worked out how to make money out of running prisons or trains. They do not do so directly.

There are good reasons for this. Let us take a few examples from history, “investment opportunities” presented as safe, prudent and lucrative ventures that successive governments poured taxpayers money into. The Millennium Dome; The Humber Bridge; Concorde; the NHS IT project; all vastly over budget, and an utter waste of money.

Or the Advanced Passenger Train and its unique “tilt” mechanism; cost £150m and never carried a single fare. Any and every block of 1960s high-rise flats that has since had to be dynamited, though the local authorities who built them are still paying off the debt. Nuclear power stations that promised electricity that would be too cheap to bother metering. Not to mention Boris’ glass testicle, by which I mean City Hall, as it has been renamed with cruel cockney humour.

Now of course there are worthy public projects that can earn a return for investors. The point is that the best people to decide on whether to invest your hard earned cash into such schemes are not the politicians who would like to get some votes off the back of them, but the investment managers we appoint to look after our cash. Private or public sector, would you really lend Boris Johnson your life savings so he can run a tube line to Bromley? I thought not.

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