‘Golden’ Brown’s cattle raid on pensions

We can see the attraction for a cash-strapped government. The total value of British pension investments is over £1,800 billion. Taken together with the near £2,000 billion assets of UK insurance companies, there is enough to pay off the national debt and still have a trillion left over. A goldmine! Why not put it to use for the nation?

The idea is in the Brown Commission’s comprehensive plan for Britain’s future, as tasked by Sir Keir Starmer and issued in 2022:

‘We see scope for greater private investment in our infrastructure from careful, long-term investors, like some of our large pensions and insurance companies, who need stable long term assets to support pensions in payment. The regulatory framework which governs those investments should not discourage it, and government and local leaders should work with the industry to devise the best mechanisms to attract private capital into these long-term public projects.’ [p. 83]

It was then included in Labour’s 2024 General Election manifesto:

‘Britain’s world-leading financial services industry has a major role to play in mobilising trillions of pounds in private capital to address the greatest long-term challenge of our age. Labour will make the UK the green finance capital of the world, mandating UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement.’

The late, great Frank Field MP foresaw the temptation offered by juicy pension funds when he set up the Parliamentary Pensions Reform Group. The 2002 Civitas discussion document stressed [pp. 37-38] the importance of trustees in protecting the assets from outside interference:

‘Because it is desirable to curtail the influence of the government in running the pension, the trustees will be invested with quite considerable powers. These will also be established in the Act and will include:

• the power to appoint and dismiss fund managers and decide on the number of fund managers the scheme requires;

• the setting of investment strategy;

• the power to make changes in contribution rates.’

The primary responsibility of pension funds is to provide pensions. Using their assets for political objectives, e.g. to boost investment in the UK, risks compromising fund performance and thus the financial security of the pensioner.

Here are three drawbacks to Westminster’s proposed tinkering: