I visited the National Association of Pension Funds conference in Scotland earlier this week (see how hard I work for you?). There, I met a very charming Dane: Morten Nilsson of NOW Pensions.
NOW has been set up by ATP, the largest pension fund in Denmark, to provide workplace pensions in the UK when new regulations requiring all employers to provide pensions for staff come into force. It'll be doing so alongside (and in competition with) our own government-supported pension provider, Nest.
This should, I think, make anyone involved in the setting up of a workplace pension scheme or in a position to press people setting one up quite excited. Nest, being new, has no investment record and, while it is supposed to be coming very cheap by UK standards, its costs are still relatively high (those enrolled will pay a 1.8% fee on contributions and an annual fee of 0.3%).
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ATP has an excellent record, returning more than 7% a year for ten years, and NOW will be a little cheaper: it will match the 0.3% annual fee and, in most cases, beat the 1.8% on contributions with its flat £1.50 monthly fee.
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Nilsson and I talked about all sorts of things but, in the course of our chat, he made the excellent point that the real problem with our pensions system is not so much its complications and confusions, or even its dismal reputation (with a little focus all this can be sorted out). Instead, it is the fact that we persist in insisting that people care about it and that they care about what they invest in.
Years in the business in Denmark have convinced him that the best way to deal with people's apathy when it comes to retirement is to take their money by force ie, auto enrolment into pension schemes with no opt out and then to give them one well-managed scheme in which to invest. No choices. No confusions.
He may well be right and anyone who thinks he is can lobby their employer to shift their pension provision to NOW in the hope that Nilsson and his lot can grow them a happy retirement using their cheap and choice-free fund.
However, for the moment I'm afraid that most of us are stuck making our own choices when it comes to our pensions and I, as ever, have firm opinions on what choices you should make.
At the end of last year, I urged you yet again to think about buying into Japan. I doubt you listened, given that I have urged you to do the same so often. But, had you done so, I think you'd be pleased now. Robert Brooke of Halkin Services points to something interesting: one of Japan's markets, the Tokyo Stock Exchange Second Section (TSE2) has just set a new record for the number of days in succession it has risen without a break.
From January 16 to February 28 it rose on every single trading day, beating its previous record set in 1975. Does this matter? Maybe, maybe not, but it is worth noting, as Brooke does, that "the 1975 record was set just six months after the TSE2 index hit the October 1974 low that marked the end of the 1973-74 bear market. One of history's greatest bull markets followed.
I've talked endlessly about the many reasons to buy into Japan: it's cheap; its banks are in great shape and keener on lending out money; it's beginning to see an end to deflation (or there has at least been a pick-up in inflation expectations); and the Bank of Japan has finally joined in the great global money printing experiment, something that should naturally push the yen down and help the nation's exporters.
But Brooke mentions another and possibly better point. Bears on Japan always ask who on earth is going to buy Japanese stocks after the debacle of the last 13 years. But perhaps a better question is: "who is going to sell the Japanese market?" At the end of 1989, pretty much every investor of every kind in Japan was heavily invested in Japan. Since then, a few brief breathers aside, they've all been sellers.
So here is the key to the end game, according to Brooke: "the great Japanese bear market will end when the supply of stock from Japanese investors falls below the underlying level of demand." Stock prices are about the flow of money (that's why prices go up when more money is created). For a decade in Japan, the flow of money has been one way. As individuals and institutions have sold up and the banking sector has slowly imploded, it has flowed out of equities. All that has to happen for the great bear market to end is for the cash flow into Japanese equities to be positive even if only very slightly.
Brooke offers the tantalising thought that this might have happened, that the record winning streak for the TSE2 might just be telling us that cash flow has very quietly turned positive.
Given that my own pension is still very long in Japan and not showing anything like a 7% annual return I really hope so.
