Synthetic investments do nothing to help UK recovery, says Aifa
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Aifa director Robert Sinclair says “synthetic investments” such as trackers do nothing to help the UK economy and investors must back pensions to aid a long-term recovery.
Speaking this morning at an Aviva roundtable debate on the Budget and the impact of the Government’s pension simplification on long term savings, Sinclair said investors must back big pension engines which boost equity participation and help the economy more in the long-term.
He said: “If we have more people investing into the big pension engines which then invest back into the UK economy, we get more equity participation and we get back to a better place. We get away from people wanting to invest in trackers and pseudo trackers -synthetic investments do nothing to help the UK economy. They are effectively bets and are not actually adding to the ability of large investment vehicles investing in our future.
“We have pension structures that are involved in long-term investment decisions where we will get a better economy in the longer- term. It is a better way for us to be heading.”
Sinclair said the Government’s phasing out of the default retirement age would present the insurance industry with some major challenges in terms of pricing products suitably with increased longevity.
He said: “The worry is that people still want the free lunch, we used to have the Rolls Royce final salary pension system but because a few misdemanours happened it has been regulated out of existence now. With a strict set of rules we have made it impossible to have a good pension structure. That is the risk of regulation and regulation to a degree that is wrong.
“The challenge for us as an industry is how we get the trust back of politicians and regulators to play the game we used to play. We had an industry that had all the golden eggs and we some how lost them.”
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