About 33 years ago Robert Maxwell fell off his boat. (Or jumped, or was pushed, if you prefer.)
The human pain he left in his wake was quite something, and continues.
After he died, one of the things that emerged was that he had embezzled hundreds of millions of pounds from the pension funds of his publishing empire.
Back then, the rules on pensions were, erm, a bit slack.
They have since been tightened, rightly, but perhaps too much, in ways that are now hurting the economy and that can’t all be blamed on Ján Ludvík Hyman Binyamin Hoc (Maxwell’s original name).
His frauds were part of what pushed regulators into making pension funds play safe. They had to show that their assets could meet their liabilities at short notice.
If the pension funds thought that it would be better for future pensioners if they were free to take a bit more risk now in return for higher payouts later, they weren’t that keen to be seen saying so.
In 2000 another accounting change, aimed at safety, pushed big pension funds out of shares and into UK bonds.
That hasn’t been all bad, since it created a massive market for government debt at a time when the government needed to borrow like almost never before.
Perhaps it is time to move on. Archie Norman, the chair of M&S and a man for whom the term City grandee might as well have been invented, thinks so.
Pension funds avoiding the stock market has just led to a dearth of capital for entrepreneurial companies of all sizes and increased pension deficits, since the return on bonds is bound to be lower than that from shares, in the long run, which is what pensions are all about.
“Most large corporate pension funds are invested for low risk and low return,” he notes. The situation in Europe is different, where funds are willing to invest for the longer term “creating a deep pool of capital, a thriving stock market and the growth of private companies”.
That sounds like a good thing to have. How about it Keir?
