WEBVTT - Canary Wharf Chairman Nigel Wilson on Reforming Pensions

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<v Speaker 1>Back to the UK now and the Chancellor Rachel Reeves

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<v Speaker 1>has been making her pitch to the financial services industry.

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<v Speaker 1>In her first Mansion House speech, it included a promise

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<v Speaker 1>to rethink regulation of the sector and efforts to boost investments.

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<v Speaker 1>Joining us now to discuss is Nigel Wilson, chair of

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<v Speaker 1>the Canary Warf Group, former CEO of Legal and General

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<v Speaker 1>of course and a regular visitor to these Bloombag studio.

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<v Speaker 1>So very nice to see you once again, Nigel. You've

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<v Speaker 1>also shared, of course the recent Capital Markets of Tomorrow

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<v Speaker 1>report looking at the challenges facing the city. So well

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<v Speaker 1>placed to review Rachel Reeves and everything we got from

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<v Speaker 1>Mansion House. How did you read her comments on rethinking regulation, Nigel,

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<v Speaker 1>because this is part of this is part of a

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<v Speaker 1>push to perhaps refocus some of the regulatory bodies we

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<v Speaker 1>have in the city around growth.

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<v Speaker 2>Yeah. I think the growth agenda came back. You know,

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<v Speaker 2>we had a sort of ideological diversion for the budget

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<v Speaker 2>and then we've gone back to the growth agenda, which

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<v Speaker 2>is a good thing. And I think the upbeat message

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<v Speaker 2>around growth has been central again is actually what we

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<v Speaker 2>should be spending up time on because you know, you know,

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<v Speaker 2>the economy is muddling through growth dynemic. Everybody's panicking about

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<v Speaker 2>how they handle the NIX issues and the various other

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<v Speaker 2>incremental taxes that have come through the budget. We've got

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<v Speaker 2>to get back to the bigger picture, which is how

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<v Speaker 2>we're going to grow. And the fact that they're going

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<v Speaker 2>to give the regulators the dual objective of delivering growth

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<v Speaker 2>I think's really positive.

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<v Speaker 1>And you think we'll get the balance right there?

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<v Speaker 3>Will we?

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<v Speaker 2>Because of I'm sure we won't get the balance right.

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<v Speaker 2>We're going to get the direction of travel right, yeah,

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<v Speaker 2>which I think is what we haven't had for twenty

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<v Speaker 2>five years. And whether that's the water industry or the

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<v Speaker 2>telecoms industry, along the financial services industry, we have not

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<v Speaker 2>got the growth agenda anywhere embedded in the regulations of

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<v Speaker 2>those of all those industries. And that has to be

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<v Speaker 2>part of the long term growth strategy that we have

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<v Speaker 2>as a country. We definitely don't have it right now.

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<v Speaker 3>Will the simple shifting of our addition to those mandates

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<v Speaker 3>of those regulators, they'll be enough to encourage more risk

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<v Speaker 3>taking and thus spur the investment that reads is helping

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<v Speaker 3>that a well?

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<v Speaker 2>No, I think the culture of the organizations needs to

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<v Speaker 2>change dramatically because sometimes the messages the top get diluted

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<v Speaker 2>when they come to implementation. And I know we used

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<v Speaker 2>to spend sometimes years trying to get a new asset

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<v Speaker 2>a class approved by the regulator for investing in the UK,

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<v Speaker 2>and often as a consequence of that, we ended up

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<v Speaker 2>investing outside the UK in an asset class which already

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<v Speaker 2>existed in America. And that's not a good outcome, and

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<v Speaker 2>that was because they didn't have a growth agender. They

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<v Speaker 2>were excessively risk averse, and as a consequence of that,

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<v Speaker 2>we took action which allowed us to deliver on a

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<v Speaker 2>global thing, the right outcome, but definitely not the right

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<v Speaker 2>outcome for the UK.

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<v Speaker 1>And that takes us on to the pension activity that

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<v Speaker 1>we've seen from Rachel Reeves and this idea that you

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<v Speaker 1>pull these pension assets together to make these mega funds,

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<v Speaker 1>and maybe that increases some of the investment that we

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<v Speaker 1>see from pensions into infrastructure projects in the UK, although

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<v Speaker 1>not necessarily in the UK. So Nigel tell us your

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<v Speaker 1>response to where we've got to.

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<v Speaker 2>On this, Yeah, but not necessarily in the UK, which

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<v Speaker 2>is because what we've seen is in LGPS for example,

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<v Speaker 2>Legal and General manage a huge amount of money for LGPS.

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<v Speaker 2>Thirty eight percent of their investments used to be in

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<v Speaker 2>UK equities. It's now about nine percent. So the first

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<v Speaker 2>wave of consolidation which we've seen in LGPS didn't result

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<v Speaker 2>in more investment in the UK, resulting in entirely the opposite,

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<v Speaker 2>which is a big decrease in UK equities. So you

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<v Speaker 2>give the necessary conditions, but it's not sufficient conditions.

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<v Speaker 1>So scale isn't everything.

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<v Speaker 2>What else Scale isn't and everything it's actually here. We

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<v Speaker 2>have to create the planning opportunities which allow us to

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<v Speaker 2>have these investments, but also the risk appetite to want

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<v Speaker 2>to do these things. You know, America leads the way

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<v Speaker 2>in lots of these asset classes, and they have some

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<v Speaker 2>amazing companies, you know, the Brookfields and Blackstones and Apollos

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<v Speaker 2>and Kkrs who've been developing these assets in private marketers. Indeed,

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<v Speaker 2>you know JP Morgan and the other banks have. We

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<v Speaker 2>haven't got that capability at the moment in the USE.

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<v Speaker 2>So if we're not careful the assets, people will invest

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<v Speaker 2>in those assets, but not necessarily in the UK in

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<v Speaker 2>those assets, which is what we saw over the previous

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<v Speaker 2>fifteen years in UK equities for the decline from almost

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<v Speaker 2>forty percent down to less than ten percent.

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<v Speaker 3>But isn't it always going to be the case that

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<v Speaker 3>you know, comparing yourselves to the US is is an

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<v Speaker 3>extremely difficult thing to make the case for. How do

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<v Speaker 3>you what encouragements do? I mean you're talking about the

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<v Speaker 3>local government pension schemes as the changes that rate res announced,

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<v Speaker 3>But do pension funds need a mandate? Doesn't need to

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<v Speaker 3>be very clear that they have to push x amount

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<v Speaker 3>of assy.

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<v Speaker 2>I'm flavor of soft compulsion, which is as that look like,

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<v Speaker 2>which is a bit like auto enrollment. You know, people

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<v Speaker 2>are encouraged to invest in things and if they don't

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<v Speaker 2>want to, they opt out. But we certainly should be

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<v Speaker 2>setting targets or frameworks which allow them to invest more

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<v Speaker 2>in the UK so that over a long period ten

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<v Speaker 2>twenty thirty years we see more of these moneys being

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<v Speaker 2>flawed into risk assets in the UK as are paused

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<v Speaker 2>to too much of the assets in cash and guilts

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<v Speaker 2>to be frank.

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<v Speaker 1>Why do you think they've stopped short of doing that?

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<v Speaker 1>Because this was a criticism of the last administration as well,

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<v Speaker 1>that they didn't mandate that the money had to stay

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<v Speaker 1>in the UK, and it might be because well, if

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<v Speaker 1>you want best execution for future pensioners, you need to

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<v Speaker 1>be able to invest abroad. But you could attach it

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<v Speaker 1>to text benefits and say okay, put it in the

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<v Speaker 1>UK and then you get these tax.

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<v Speaker 2>Breaks absolutely, and cash isis are probably the best example

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<v Speaker 2>of that, where we give everybody a tax brik for

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<v Speaker 2>investing in cash with the only country in the world

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<v Speaker 2>that does. Add that's a three hundred billion pound asset

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<v Speaker 2>class and imagine if we fiers that out over time

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<v Speaker 2>and got people to invest in other assets which are

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<v Speaker 2>of greater strategic value to the UK and deliver better

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<v Speaker 2>returns over the long term, that would be a good outcome.

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<v Speaker 3>I'm curious to know more about your view of this

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<v Speaker 3>idea of setting targets. What should what's the idea level

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<v Speaker 3>for a target for investment in the UK assets? What's

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<v Speaker 3>going to do enough to spur the growth that then

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<v Speaker 3>creates the business case behind us.

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<v Speaker 2>Well, I feel look at DC Pensions, which was kind

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<v Speaker 2>of where richual was talking talking about, and I think

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<v Speaker 2>much of you know it, it's quite a good It

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<v Speaker 2>was a good speech by Richual. I thought, and I've

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<v Speaker 2>now read it twice and listened to it last night

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<v Speaker 2>as well. The challenge in DC it's growing very quickly.

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<v Speaker 2>Most people invest in the default fund. It's the it's

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<v Speaker 2>the middle one on the first page, in the middle box,

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<v Speaker 2>and people tick that and they very rarely change from that.

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<v Speaker 2>So the default fund can be used as a vehicle

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<v Speaker 2>for nudging in the right direction. And I would say,

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<v Speaker 2>let's give UK infrastructure a five percent allocation within the

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<v Speaker 2>default fund. And that's an easy.

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<v Speaker 3>Need to be huge what it doesn't need to be

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<v Speaker 3>a huge It doesn't need.

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<v Speaker 2>To be huge, and it doesn't you know, you know,

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<v Speaker 2>everybody being very weird about it being non competitive and

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<v Speaker 2>all the rest of it. We've got a huge infrastructure deficit.

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<v Speaker 2>How we're be going to fill it is actually get

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<v Speaker 2>people to be nudged in the right direction, in the

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<v Speaker 2>same way that young people should be investing in young companies,

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<v Speaker 2>you know, their friends and setting up these new companies,

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<v Speaker 2>and maybe have a two percent allocation for that. Again

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<v Speaker 2>not massive allocations.

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<v Speaker 1>And why are those things not there already? Then, Nigel

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<v Speaker 1>just remind us, since long we've spent a long time

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<v Speaker 1>getting at this place.

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<v Speaker 2>I've failed miserably is one of the reasons they're not there.

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<v Speaker 2>I've tried very hard for fifteen years to get this

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<v Speaker 2>to happen in the in the UK, and there's always

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<v Speaker 2>been a reluctance to doing it. But now we can

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<v Speaker 2>see there's no growth, the tiny amount of growth, and

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<v Speaker 2>it's been.

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<v Speaker 1>About risk aversion. Has it that those things weren't there?

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<v Speaker 2>Well, it's sort of an ideological objection to actually some

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<v Speaker 2>soft compulsion, and that I think is the wrong approach

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<v Speaker 2>when there's such an urgent need in the UK for

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<v Speaker 2>this real, real money to make a difference to everybody's lives,

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<v Speaker 2>and everybody thinks it's a good idea, but you've got

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<v Speaker 2>to give a bigger nudge than we've been giving so far,

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<v Speaker 2>and we're not saying go wild and reckless and do

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<v Speaker 2>all things. That's why the growth objective is so important.

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<v Speaker 2>Then the regulator can approve these asset classes much quicker

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<v Speaker 2>and we can see much greater growth in these businesses

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<v Speaker 2>in the UK.

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<v Speaker 3>I want to kind of put to ask you, for

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<v Speaker 3>a want of better word about the vibes right because

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<v Speaker 3>I'm sensing you're quite positive about what you heard from

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<v Speaker 3>Rachel Reeves last night, good ideas, you know, moving us

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<v Speaker 3>in the right direction. That's contrary to the narrative that

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<v Speaker 3>we've had since the budget, particularly from business groups. Weren't

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<v Speaker 3>happy about employers' national insurance contributions going up as well.

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<v Speaker 3>Do these things cancel each other out?

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<v Speaker 2>I'm not sure they cancel them out From a business

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<v Speaker 2>point of view. I think people are still very grumpy

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<v Speaker 2>about the budget and that's going to mess up a

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<v Speaker 2>lot of business plans and a lot of change.

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<v Speaker 3>And are you seeing that, you know, people looking at

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<v Speaker 3>Canary War for example.

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<v Speaker 2>And not really looking at Canary Wolf. But I think

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<v Speaker 2>as I travel across the country and meet lots of people,

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<v Speaker 2>you know, I think that's definitely the case. The direction

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<v Speaker 2>of travel was good last night. And talking to the

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<v Speaker 2>Treasury as well, which I did, was they think the

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<v Speaker 2>speed of travel has been going to be real queer.

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<v Speaker 2>But but are we doing enough fast enough? I think

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<v Speaker 2>the answer to that is not. But the direction of

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<v Speaker 2>travel is better than definitely better than what we saw

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<v Speaker 2>in the budget.

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<v Speaker 1>And on the big picture questions, Nigel, let me ask you,

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<v Speaker 1>we're coming towards the end of this year. We know

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<v Speaker 1>that next year is going to be to some degree

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<v Speaker 1>of our own making, but here in the UK, but

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<v Speaker 1>to some degree dictated by others. And we have a

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<v Speaker 1>return to the White House in the United States that

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<v Speaker 1>will have a big impact on so many people's lives

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<v Speaker 1>and finance in many places. Do you think that the

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<v Speaker 1>growth plans in the UK are sort of trump proofed?

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<v Speaker 1>Are you watching with anxiety what might happen?

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<v Speaker 2>Yeah? I think everybody's got to watch you with a

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<v Speaker 2>bit of anxiety as to what might happens, because you know,

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<v Speaker 2>there's a lot of contrarian approaches to solving problems that

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<v Speaker 2>are going to happen, and there's some very addish appointments

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<v Speaker 2>that have been made already, which you guys have been

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<v Speaker 2>talking about. And yes, we'll see some compromise on tariffs,

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<v Speaker 2>but they're still tariffs, and we know that there's there's

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<v Speaker 2>all sorts of negative consequences as a part of that.

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<v Speaker 2>The whole defense and defense spending in the role of

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<v Speaker 2>NATO is going to have a big impact on Europe.

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<v Speaker 2>I hope personally that again, and kiss Sarmus said that,

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<v Speaker 2>and Rachel said that. Indeed, Governor Bank of England said this,

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<v Speaker 2>let's get together and be closer to Europe. You know,

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<v Speaker 2>Brexit was a mistake, but actually, let's move forward and

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<v Speaker 2>figure out how we can develop better partnerships with the

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<v Speaker 2>rest of Europe. And Trump may prove to be the

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<v Speaker 2>catalyst that makes that happen, and so that may be

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<v Speaker 2>the positive outcome of all of this, is that we'll

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<v Speaker 2>all be treated in a certain way and that actually,

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<v Speaker 2>as a consequence of that, we may all get together.

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<v Speaker 2>Because you know, the German economies is in a mess.

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<v Speaker 2>The French economy, I think, is in a mess. The

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<v Speaker 2>Italian economy has got no growth whatsoever. Some of the

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<v Speaker 2>smaller countries are doing reasonably well, but net net, it's

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<v Speaker 2>a pretty miserable show. And the Europe's going to muddle

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<v Speaker 2>through as well. Next year, the UK has going to

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<v Speaker 2>muddle through. We've got to work together in partnership and

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<v Speaker 2>figure out how we can grow together and how we

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<v Speaker 2>can invest so much more because we've got the capital.

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<v Speaker 2>It's all sitting around. We've had regulators been overly risk averse,

0:11:09.400 --> 0:11:11.839
<v Speaker 2>which has ended up with companies being overally risk averse.

0:11:11.880 --> 0:11:15.240
<v Speaker 2>Our politician's been risk averse, and the outcome of this

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<v Speaker 2>excessive risk aversion is low growth, and that's been a

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<v Speaker 2>terrible outcome for US as a society,