Press Coverage
Programmes
Author
Joe Zammit-Lucia
Joe Zammit-Lucia is a RADIX Co-Founder and board member. He is an entrepreneur and commentator on business and political issues writing in outlets in the UK, US, Germany and the Netherlands. His particular interest is the relationship between business and politics.
Katie Martin suggests that the government is after “our money” in pushing pension funds to invest in much needed UK projects (“Governments cast a hungry eye over public piggy banks”, Opinion, December 3).
Through tax and national insurance reliefs, the UK government subsidises pension savings to the tune of some £50bn a year. In other words, returns on pensions are not solely “your money”. The government therefore is perfectly in the right; indeed it has a responsibility to seek to improve the returns to the UK economy from this huge taxpayer subsidy.
One option would be to limit such subsidies only to those pensions savings invested in the UK economy. Pension holders can then make their choices.
A rough and ready calculation suggests that, for an investment manager making a regular 5 per cent annual return over 30 years, the removal of tax relief would need investment returns to increase by a reliable 1.5 to 2 percentage points a year every year for 30 years to make up for the loss of that relief.
Given a choice between the certainty of tax relief and its compounding effect, and trusting my investment manager to reliably make such increased returns, I know which I would choose.
Despite all the chest pounding, I doubt many managers would be prepared to put their money where their mouth is and guarantee such increased returns in exchange for the freedom to invest wherever they see fit.
Further, the quality of life of retirees is not only a matter of money. They also need a functioning NHS, quality public transport and myriad other public services and infrastructure. Should investment managers not also care about those benefits to account holders?
Or do they, as in the Tom Lehrer song, simply turn away claiming: “‘That’s not my department,’ says Wernher von Braun.”
Joe Zammit-Lucia Trustee, Radix Big Tent, York, UK