Prince Charles Attacks Pensions Market

Prince Charles Attacks Pensions Market.

Speaking on a pre-recorded video at the National Association of Pension Funds Conference, HRH Prince Charles suggested that the pensions industry needed to adapt to the needs of pension savers or they face a “miserable future”.

The Prince suggested that pension fund managers needs to find a way to make pension fund investing more stable with a longer term approach to deliver consistent pension returns to enable the public to plan for their retirement in a sensible manner.

Comment

We have to agree with HRH but we suggest that it is not the pensions industry that needs to adapt but the Government needs to change the law. 

It is ultimately public policy that is making the pensions industry a game of “Russian Roulette for most investors.

We suggest the problems are as follows:

• Volatility:  investment market volatility makes timing of investment decisions and trying to grow money difficult.  “Naked Short Selling” where speculators sell assets when they do not even own them yet thus driving markets wildly up and down means that the stable investment market of 30 years is no longer here.  During the financial crisis, many governments, including the UK banned naked short selling and the market became quite stable and benign.

• Government Spending/Government Borrowing:  When a government borrows, in the UK it issues Gilt Edged Securities (GILTS), and overseas Government Bonds.  In the UK, the gilt is seen as stable investment for pension companies to underwrite and back their annuity, pension payment, guarantees.  A guaranteed income by the Government, in the form of Gilts, means pension companies can guarantee income to their pensioners receiving their payments.  If Government borrowing, spending and debt overall is not controlled, it means that interest rates in gilts can be volatile.  Currently, interest rates and therefore annuity rates are at an all-time low.

• Tax Law:  Government controls pension rules and pension tax law via HMRC.  Pensions in the UK are less flexible than nations such as New Zealand, Canada, Australia and the USA.  Flexibility needs to be introduced to encourage people to save.  If Government/HMRC would relax investment and tax rules, people may be encourage to save and pension companies would be encouraged to develop more attractive and flexible products for retirement.