The biggest political idea of the year has been floated today, but not at the party conferences.
Boris Johnson has proposed in his Telegraph column that all the 39,000 UK public sector pensions should be rolled up into one Citizens Wealth Fund, which would, among other things, invest in UK infrastructure. He claims this would generate returns of 7-8%, compared to the current 2-3% yield on gilts.
One has the sense this idea could gather momentum, not least because of Mr Johnson’s high profile and skills as an advocate. At the very least it could be a big talking point for asset managers and for the City.
However, the situation is not as simple as Mr Johnson suggests. While one understands the compelling logic of avoiding duplication in the thousands of funds, putting all the eggs in one basket might itself create risks. Also giving such a fund a “social mandate”, ie to invest in infrastructure, could well be in conflict with its “economic mandate” to generate returns. Governments may not be able to resist raiding the kitty for their pet projects. There is also the issue of deficits. Currently, the majority of public sector pensions are only about 75-80% funded.
Still, the Mayor London may be onto something.
Read Boris’ article full here.
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