GEORGE Osborne’s grandiose plan three years ago for pension funds to take up the slack by investing billions of pounds in hundreds of new construction schemes even felt a bit hokey at the time. By and large, investing major amounts of money in Britain’s infrastructure and economic arteries is not what risk-averse pension funds do.
Yes, the guardians of people’s longest-term savings do play about at the margins of the private finance initiative (PFI), particularly already established – and so less risky – PFI projects in “safe areas” such as schools and hospitals.
But fiduciary duty was never likely to see the pensions industry – via the Pensions Infrastructure Platform set up at that time – plough the vast sums projected into primary infrastructure projects.
It goes with the grain of institutions responsible for people’s pensions, and taking long-term views to meet them, to invest in completed projects rather than those on or near the drawing board. You cannot blame politicians for looking covetously at all that pension cash and dreaming of it being used to get much-needed building projects off the ground, and create jobs in the process. But they are looking at the possibilities – and risk – through the opposite end of the telescope to the pensions industry.
It says much that the infrastructure platform was established with a target of raising £2 billion in its first year. Three years later its first fund has raised £330 million.
This should not be used with a stick to beat the industry, which is also facing its own problems including another initiative from the Chancellor – the abolition of the requirement for pensioners to buy an annuity on reaching retirement age.
Pension funds have been right to help where they can, but have rightly concluded that their main function is to safeguard people’s pensions, not to take risks on them with uncertain building outcomes.
Bank deposit ring-fencing moves closer
AT FIRST sight, Britain’s big banks being given just three months to explain to regulators how they would ring-fence high street operations from their riskier business if the latter ran into trouble is an unusually brisk timetable. But, in reality, banks have been working on such fire-wall plans since they were recommended as part of John Vickers’s Independent Commission on Banking report three years ago.
Anything that prevents a highly disturbing rerun of the chastening taxpayer bailouts of banks in 2008 is welcome.
And, for once, Britain gold-plating European Union rules is to be welcomed, with the Bank of England saying yesterday that if a bank goes bust, its accounts should be transferred to another lender within 24 hours so that customers can continue to withdraw their money and use their cards without interruption, instead of having to wait for statutory compensation.