Pension funds and the City in the UK’s contradictory growth spurts

My paper for the CITYPERC/SPERI workshop ‘Capital Divided? The City and the Future of the British Economy’.

UK pension funds hold capital equivalent to 135 per cent of UK GDP. Yet relatively little of their capital is invested in the long-term productive capacity of the UK economy. Accordingly, the coalition government has earmarked the reorientation of pension fund investments in this regard as central to its economic rebalancing agenda. This paper considers the potential for pension funds to re-direct their investments in this regard, by exploring the relationship between pension funds and the asset management industry. The latter is often described as a key barrier to sustainable investment by pension funds and, indeed, an agent which distorts the real intentions of workers’ capital. It also asks to what extent the coalition government’s agenda is focused on this pivotal relationship. The paper argues that the asset management is not in any straightforward sense the enemy of workers’ capital. Both the asset management industry and the nature of pension provision in the UK are products of the restrictive imaginaries of financialised capitalism. Faced with this much more profound barrier to reorienting pension fund investments, the coalition government has largely forgone any serious attempt to reshape the UK’s investment practices, and instead reinforced the conservative nature of institutional investment in the UK by promoting a highly individualised version of ‘defined contribution’ pensions saving. Moreover, the government now looks upon the asset management industry’s intermediation activity  as a source of economic growth in-itself.

Click here to read the full paper.

Image: [Duncan]