Capital Economy, Business and Finance
What’s the point of a patriotic pension? Last week’s UK budget promised retirement savers tax free gains on an extra £5,000 a year invested in individual savings accounts (ISAs) as long as the money is invested in UK stocks. From the government’s point of view this makes sense as a way to woo retail investors back to London, whose stock market increasingly looks like the farmer’s market time forgot because it was on the wrong side of, say, the Berlin Wall. There is also an argument that London-listed stocks are, on balance, cheap in terms of price-to-earnings ratios because they represent stakes in unsexy but well-run companies. But savers, like pension funds, have to think of their own returns first, and they will have done four times better over the past 15 years if they put their money in the S&P 500 rather than the FTSE 100. Either Jeremy Hunt knows something the markets don’t and that is all about to change, or he’s hoping individual investors don’t notice the underperforming elephant in the room, while knowing full well that institutional investors will.