Rachel Reeves’s plan to mandate how pension funds invest was always a mistake | Nils Pratley
A simple principle lies at the heart of pension investment: the pension manager must invest in the best interest of the client.UK ministers have often wished UK funds would show more home bias by channelling more pensioners’ cash towards domestic assets in the interests of economic growth, but the fundamental rule of the game has always been understood.You don’t mess with the fiduciary duty.Thus, when Rachel Reeves a year ago unveiled her Mansion House accord – a pledge by 17 of the biggest providers to earmark a slice of workplace pensions for UK private assets – it was made clear the arrangement was voluntary.What’s more, as the signatories emphasised, the commitment was “subject to fiduciary duty and the consumer duty” and “dependent on implementation by the government and regulators of critical enablers”.
Those essential qualifications, one could say, weakened the force of the accord, but what else could the chancellor do? On the plus side, she had secured a flag-waving announcement that demonstrated willingness on the part of the funds to try to meet the specific goal of allocating 10% of assets to private markets (think infrastructure, property, venture capital), of which half would be in the UK.All the big names – Aviva, Legal & General, M&G, Mercer, NatWest and more – were on board.Their progress towards the target could be measured.Life became messy, however, when Reeves raised the prospect of having powers to mandate the funds to follow through on their commitments.One can understand her motivation, of course.
If you think more UK investment by UK funds means faster UK growth, you want to be confident the cash will flow.Yet “backstop” powers always failed a test of logic: how can a pledge be both voluntary and enforceable?Most of the same big names spoke up against “mandation”.Scary visions were raised of the government, or a future one, forcing pension savings to be thrown into money-pits such as the HS2 railway.It didn’t matter how many times the pensions minister, Torsten Bell, said there was no intention to use the powers, the providers were adamant: their fiduciary duties came first.Quite right, too.
At that point, the government should have recognised it was in danger of burning goodwill, and given up on mandation.Instead, it ploughed on, introducing a clause into the pension schemes bill.The result was a round of ping pong with an admirably awkward House of Lords, a couple of concessions, and then bigger concessions this week to get the bill over the line.In short, a back-stop power will still exist – but only in heavily diluted form.The powers can’t be used before 2028.
They will disappear if not used by 2032, and by 2035 if they are.Critically, a “saver’s interest test” means the government would have to ask the financial regulator to assess any ministerial direction to mandate.Nor can ministers force money towards specific projects, meaning the HS2 nightmare is off the table.Reeves and Bell can console themselves that something that vaguely resembles the original mandation idea is on the statute book.And, maybe, as a result of the months of kerfuffle, a little more money will flow to UK assets than would otherwise have been the case.
In reality, the retreats and compromises have, thankfully, robbed mandation of its bite,After this bruising battle, it would be brave for a chancellor to go to the Financial Conduct Authority for an independent assessment of use of the powers,Such a move would invite quarrels over two of the providers’ underlying concerns – whether there are enough attractive investable projects and whether government encouragement towards one asset class inflates prices against the interest of savers,The pity is that the core of the pensions bill is excellent, including measures to force consolidation and efficiencies in the pension fund world – changes that have been talked about for 20 years,But to be seen to try to trample on fiduciary duty was a clear mistake.
A big climbdown looked inevitable, and has now happened.“I think if the government were to come along in a couple of years’ time with a Mansion House accord 2.0, we would be sceptical,” says one industry figure.The scepticism is understandable – and could have been avoided.
Jon Stewart on White House correspondents’ dinner: ‘We can’t even pull off a dinner that shouldn’t have existed in the first place’
Late-night hosts responded to the White House correspondents’ dinner shooting and Donald and Melania Trump’s attempts to blame political violence on Jimmy Kimmel’s jokes.Jon Stewart resumed his Monday night chair at the Daily Show less than two days after the shocking attack at the White House correspondents’ dinner on Saturday night, which resulted in the arrest of one man and, thankfully, no injuries. “It was supposed to be an evening of fun and merriment until, like most things in America, it was interrupted by gunfire,” Stewart said. “This is why we can’t have nice things. And to be perfectly frank, it’s not even a nice thing
Antiquities dealer who exposed thefts at British Museum dies aged 61
The academic turned antiquities dealer who exposed the theft of hundreds of artefacts from the British Museum has died aged 61.Dr Ittai Gradel, from Denmark, alerted the British Museum and the police after he was able to buy dozens of museum artefacts on eBay over the course of several years.Gradel died of renal cancer days after receiving a rarely presented medal from the museum in recognition of what its director called his “very significant contribution”, according to the BBC.A police investigation is still ongoing, more than three years after the museum reported the thefts to Scotland Yard after pressure from Gradel. Before his death in a Danish hospice, Gradel – who would have been a key witness in any trial – told the BBC it was “a bit annoying” he wouldn’t live to see the resolution of the case
Having Spent Life Seeking by Kae Tempest review – painfully earnest tale of trauma and transition
Kae Tempest’s new novel is dedicated to “you”, the reader. It also comes with a plea: “Be gentle though.” But to whom or what should we be gentle? The book or the writer? Having Spent Life Seeking is Tempest’s second novel, arriving a decade after his first and following a period of considerable personal change, including gender transition. Perhaps inevitably, it is a book full of struggle and soul-searching. It is also painfully earnest: an enervating read with an exhausting intensity that neither relents nor resolves
The Primitives: ‘A reviewer said that Crash would finish the band. Then it was in Dumb and Dumber’
The Primitives formed in the summer of 1984 with a singer called Keiron, who brought me in to write songs. When he left, we pinned up an advert in Coventry library and Tracy, who I’d actually met before on a Youth Opportunity Programme, answered. At that point, we sounded more like the Birthday Party or the Gun Club, so I wrote three new songs – Through the Flowers, Across My Shoulder and Crash – to test a more pop direction. Crash was simple and noisy, with a basic guitar line that became the “Na na na” hook.It was in our live set, but we dropped it quite quickly
Arts funding gap in the north must be closed | Letters
It was pleasing to read about Labour’s commitment to the principle of access to art for “everyone” (Editorial, 17 April). Everyone seemingly in London, where a whopping £135m has been invested in the V&A East museum – the latest addition to the buzzing East Bank cultural quarter.When, I wonder, will this Arts Everywhere Fund arrive at what used to be the buzzing cultural centre of the Albert Docks in Liverpool, where the Tate has been closed for more than two years? Where the museum of slavery has closed its doors and where what was a buzzing arts area now looks neglected and abandoned.When will places in the north, such as the once-vibrant towns of Kendal, Barrow and Kirkby Lonsdale, be given the same large sums spent on venue after venue in London?All the towns mentioned above are, incidentally, desperately bidding for UK town of culture 2028 designation in the hope of winning some desperately needed cash to enhance their cultural sector and to bring to these long-neglected and once-thriving centres accessible places where people can share in the joy of music, theatre or heritage, as are enjoyed by our lucky communities in “once neglected areas of London”.Spread the joy, Lisa Nandy, and let’s all have a share in the investment
‘I wanted alcohol to take me to a place where I was not’: comedian John Robins on the moment he realised he had a drinking problem
For most of his life, John Robins assumed he got more out of alcohol than it took from him. Now he knows it was the other way round ‘I picked up the bottle of wine and drank straight out of it. I was seven’ Read an exclusive extract from his new memoirThe Guardian’s journalism is independent. We will earn a commission if you buy something through an affiliate link. Learn more
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