The perils of the collective over the individual

That pensions investments can go down as well as up is an obvious truth:

Royal Mail’s new pension scheme has fallen 5pc since it launched, raising questions over the Government’s plans to merge more of workers’ pension savings into one investment.

The postal service’s collective defined contribution (CDC) scheme dropped 4.6pc in its first six months, against a 3.6pc fall in its benchmark index, according to its results.

The fund’s defence that what matters is performance over time is therefore true. But then cynics that we are - we might correct that to realists - we tend to think that this idea of collective management isn’t, in fact, about pension performance:

The Royal Mail CDC’s results showed it held a 77pc allocation in global equities that followed a benchmark for investors looking to align their portfolios with a goal of limiting global warming to 1.5C

That doesn’t look to us like - not anything like - the investment preference of the future pensioners. Rather, the preference of those doing the political direction of the fund’s investments. For cynics - realists - as we’ve already admitted to being we do think this whole idea of collectivising the management of pensions funds is about giving the political system control of the investments of pensions funds.

To, obviously, the detriment of those future pensions. Paying out lousy pensions is a problem for the politicians of two generations down the road while getting to spend the money on favoured things now is a joy of politicians now. No good will come of it however much joy it might bring to politicians today.

That ghost of pensions to come is being ignored, no?

Bah, Humbug, and a Merry Christmas to you too.

Tim Worstall