47
DIY Investor Magazine
/
September 2016
This means funds should give up trying to invest wisely
for growth and focus instead on stopping things getting
any worse. Funds can do this by buying bonds so as to
hedge against future interest rate falls. This may convey
the illusion of safety – but it is an illusion because
liability-driven investment in the current climate is the
most costly way imaginable to fund future retirement.”
Last week the most dangerous man in Britain, Mark
Carney, added to this financial fiasco by lowering
interest rates, sending the BHS pension fund and all the
other deficits spiralling upwards yet again.
Theresa May and Phillip Hammond have the tools to
put an end to this shambles. Legislation should be
passed to reinstate the equity dividend stream as being
a core part of pension fund actuarial calculations.
The common sense justification for this should be
obvious. As the government relies on companies to
grow its income so more wealth is distributed to finance
public expenditure over the long term. Accordingly,
income in the form of company dividends must also be
recognised as a reliable contributor to pension funds
over the long term.
As a result our quoted companies would return to
mainstream pension fund asset allocation. Pension
fund managers would have to re-engage with FTSE 100
boards as they always used to, and very soon absurd
remuneration and unserviceable BHS-type deficits will
be confined to the history books. Come on Messrs May
and Hammond, you can do it.
