The UK government’s reported plans to funnel tens of billions of pounds of pension money into infrastructure and start-up firms has been branded “complete madness” and underscores ministers’ seeming willingness to delve into people’s pension pots “every which way.”
This is the warning from Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations, as it is reported that Chancellor Rishi Sunak has held private talks to tap into private pensions to help the government fund economic recovery projects.
First mooted in November, the Long Term Asset Fund will channel money into building projects, property and private companies.
According to The Mail on Sunday, “Sources said workplace pension funds could invest a portion of employees' savings in the new fund through a ‘default’ investment option – the standard choice which many select when enrolling in their company pension.”
Mr Green says: “It appears there are no measures that ministers are not willing to consider to tap people’s pensions. They are, it would appear, plotting another potential grab on hard-earned retirement savings.”
Whilst it would be possible to opt-out of the Long Term Asset Fund, the fact is that the majority of workers would contribute as a result of enrolling in the default scheme.
“This is likely to result in billions of pounds automatically running into the fund,” he notes.
The deVere CEO continues: “How the government can suggest this is a suitable investment as a ‘default’ fund for all workplace pensions is a mystery to me.
“By its nature, the LTAF will presumably be investing in less liquid and more risky assets.
“Most pension members simply trust the default fund to be the best option into which they should invest.
“Workplace pensions are auto-enrolment schemes for UK workers who don’t have other options through their employer.
“In effect, they are suggesting that the LTAF should be a core holding for the least sophisticated pension investor in the UK. This is complete madness in my view.
“Everyone can understand the pressing, legitimate need to invest in projects to rebuild the economy following the havoc wreaked by the pandemic, but tapping workplace pensions is not the way to do it”, insists Nigel Green.
Chancellor Rishi Sunak should instead focus on support and expansion policies to secure the much-needed long-term sustainable economic growth.
The deVere CEO concludes: “These potential and controversial plans by the Treasury underscore ministers’ seeming willingness to delve into people’s pension pots every which way.”