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Speaker 2: Welcome to Marren Talk to Your Money, the personal finance
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Speaker 2: your money. I'm married. Someone'sup web and with me seior
Speaker 2: a border of money. Just add the John stuff back
Speaker 2: John him. Now, John, you and I both have pensions.
Speaker 2: We both have defined contribution pensions, not defined benefit pensions.
Speaker 2: And we have those because, like we're gonna say, like
Speaker 2: the majority of people in the UK, maybe that's not
Speaker 2: really true, Like a lot of people in the UK
Speaker 2: we're employed in the private sector. It's definitely not the
Speaker 2: majority of the UK is. It might come back to
Speaker 2: that another time. Anyway, I'm eploying the private sector. That
Speaker 2: means we have defined contribution pensions, which means that between us,
Speaker 2: us and our employer pops of money into an account
Speaker 2: and it's looked after, hopefully during the period of our employment,
Speaker 2: and then when we retire we have a lump sum
Speaker 2: of some sort and we can figure out what to
Speaker 2: do with it. Now, there are various companies that offer
Speaker 2: this to people, this ability to have their defined contribution
Speaker 2: money managed, But one of the biggest in the UK
Speaker 2: is the publicly supported NEST pensions, and neither of us
Speaker 2: have art pensions in those those are not the ones
Speaker 2: used by our employers, but none the less, an awful
Speaker 2: lot of people do. So this pension scheme has thirteen
Speaker 2: point nine million members. That is a lot of people.
Speaker 2: In fact, that might be that's pretty much all the
Speaker 2: people in work in the UK, isn't it comment? Low
Speaker 2: comment anyway? And it has assets under management of sixty
Speaker 2: one point two billion pounds, so real money. So there's
Speaker 2: a very strong chance that reasonable number of our listeners
Speaker 2: will have their money in the various funds run by NEST.
Speaker 2: And the reason I wanted to talk about that this
Speaker 2: week is because there've been various headlines over the last
Speaker 2: week or so about UK pension scheme. NEST commits four
Speaker 2: hundred and fifty million pounds to US private credit sector. Obviously,
Speaker 2: that's usually followed by despite sector headwinds, despite a bundle
Speaker 2: of drawers, et cetera, et cetera. Now four hundred and
Speaker 2: fifty million, I guess you might say it's not a
Speaker 2: huge amount of money in the scheme of sixty one
Speaker 2: point two billion pounds. But but NEST has a very
Speaker 2: public target of having thirty percent of his AUM in
Speaker 2: private assets of one sort or another by twenty thirty,
Speaker 2: so it wanted to have both private equity and private
Speaker 2: credit at thirty percent. So there's quite a lot of
Speaker 2: interesting things here. I think. The first is that it
Speaker 2: wants to put all this money into private The second
Speaker 2: is that a lot of the headlines you see that
Speaker 2: come out about it putting money into private are foreign.
Speaker 2: This is not four hundred and fifty million pounds into
Speaker 2: UK based private equity and private credit funds. It's four
Speaker 2: hundred and fifty million to US private credit. So that's
Speaker 2: two interesting things. And the third interesting thing that I
Speaker 2: think you notice as soon as you go and look
Speaker 2: at NEST and look at its funds is the extent
Speaker 2: to which a lot of the investment is environmental, and
Speaker 2: in particular climate driven. In a NEST has a target
Speaker 2: to get to net zero, is committed to net zero
Speaker 2: along the way, so a lot of its equity investments
Speaker 2: are climate aware one way or another. So I suppose
Speaker 2: that there are a couple of questions that we should
Speaker 2: talk about. I mean, one you could say is there's
Speaker 2: a really real time to invest in private credit. And
Speaker 2: the second I suppose is are people are aware of
Speaker 2: how Nest invests and does it matter? So if Nest
Speaker 2: is investing in a very equity climate aware equity way,
Speaker 2: and that's not something that everyone feels mad for, whether
Speaker 2: they should orhouldn't, it's a different matter. And if Nest
Speaker 2: is investing a lot in US private credit, should that
Speaker 2: be discussed? Should people be aware of it? Should maybe
Speaker 2: there be somewhere asking the end investor, Hey guys, do
Speaker 2: you want us to put a large don't give your
Speaker 2: money into American private credit? Or did you have some
Speaker 2: other ideas? And somehow that this shift from the old
Speaker 2: fashioned dB pensions where where it was really your problem
Speaker 2: what the money was invested in. You've got your pension
Speaker 2: at the end, towards something where it kind of is
Speaker 2: your problem what the money is invested in, and maybe
Speaker 2: you should have more of a say over it. So
Speaker 2: a couple of interesting things there, And I'm going to
Speaker 2: tuck the back at you and you look at this,
Speaker 2: what strikes you?
Speaker 3: I mean, I think that's a really important point about
Speaker 3: people haven't been more involved with their own investments. And
Speaker 3: I do think one of the positives coming or to
Speaker 3: enrollment all our time will be that people will be
Speaker 3: more in casable investments. I know it's their all pal
Speaker 3: sim in French from Parmier Leverum about how the UK
Speaker 3: doesn't have a kind of four h one key chat
Speaker 3: culture as the US does. But over time, if everyone
Speaker 3: actually has to worry about what's in their pension gets
Speaker 3: to grips with that, then that could be positive for
Speaker 3: investment in this country. But the other problem is that
Speaker 3: auto enrollment is the kind of thing that people will
Speaker 3: sit there, They'll say, oh, I'm getting paid into a
Speaker 3: workplace pension scheme. I mean, one of the reasons there
Speaker 3: is an opt out is because that's that's to make
Speaker 3: people do it by default. The problem is that when
Speaker 3: people are doing it by default, they don't think about
Speaker 3: what's in it, or they can't be bored with the hurdles.
Speaker 3: And to be fair, I went on the nest scheme
Speaker 3: for something that it's completely different from this topic, but
Speaker 3: a bit earlier today, and you can you know, it's
Speaker 3: it's not hard to look up what they're invested in.
Speaker 3: But the question is is anyone going to bother? And
Speaker 3: I do think that the and I don't know who
Speaker 3: does it because they look, if you're listening to this
Speaker 3: right and we are talking to you directly and you
Speaker 3: don't know what's in your pension or to enrollment scheme,
Speaker 3: go and check it. Don't be all easy. This is important,
Speaker 3: but we only have so many, you know, million listeners.
Speaker 3: They'll put asterisk by that and then you know it's
Speaker 3: it's so. So how do you get the message across?
Speaker 3: Is there something that you have to drop on employers
Speaker 3: to knut like, you know, educate their employees and say, look,
Speaker 3: this is, by the way, what what they're investing. But
Speaker 3: then you're going down the whole other rabbit hole of.
Speaker 2: I think this is the improved responsible Well I don't
Speaker 2: think so either, But who who's I mean, once you
Speaker 2: have your once you have your your investments at nest
Speaker 2: or believe that or whether it is, is your provider,
Speaker 2: and it makes sense to me that they should have
Speaker 2: more responsibilities. I mean, I don't, I don't know what
Speaker 2: you get. I think we have different providers. But you know,
Speaker 2: I got something in the post every now and then
Speaker 2: and it's a completely meaningless drivel and I then have
Speaker 2: to go onto the internet and spent hours trying to
Speaker 2: find the truth. Even even so I can never find
Speaker 2: out things like I mean, you can you can see
Speaker 2: that the amount of money you had at the beginning
Speaker 2: of a particular period and the amount of money that
Speaker 2: you have at the end of a particular period, but
Speaker 2: it isn't divided up, for example, into how much of
Speaker 2: that is an actual return and how much is that
Speaker 2: is you handing even more money to the provider. So
Speaker 2: the information that's provided by these penchion providers, I still
Speaker 2: think it's pretty minimal. But more importantly, it would seem
Speaker 2: to me that something like we're going to put thirty
Speaker 2: percent of your money into the private markets, that I
Speaker 2: think should come with an email to everybody saying, hey,
Speaker 2: this is our policy. I wonder how you feel about it.
Speaker 2: These are the upsides, and these are the downsides, These
Speaker 2: are the risks, and not necessarily that nests should then
Speaker 2: respond by going sixty percent of people don't want to
Speaker 2: be in private actively, so we shouldn't do that. But
Speaker 2: that people feel that they're in some way involved, that
Speaker 2: they have some agency over their own money, and that
Speaker 2: they're provider are listening, and I think that we can
Speaker 2: we can move that conversation forward. If the fund management
Speaker 2: companies were a little bit more proactive and this isn't
Speaker 2: complicated these days. I mean, you couldn't be proactive and
Speaker 2: in the way that we're discussing twenty five years ago.
Speaker 2: But technology has moved on very dramatically and you can
Speaker 2: be that proactive.
Speaker 4: I mean, that's to feel that's a good point. I
Speaker 4: think that.
Speaker 3: I also think that if they had to do that,
Speaker 3: they might think things through a bit more clearly, because
Speaker 3: I think a lot of this stuff is quite knee jerk.
Speaker 3: I mean, because well, I mean, going back to private
Speaker 3: credit for a moment, I think I'm the ESG stuff too.
Speaker 3: I mean, both of those things are fads whose time
Speaker 3: has arguably passed, or or which you could turn and
Speaker 3: say that, okay, there was a period for which those
Speaker 3: apparently worked, but the condition under which they worked have changed.
Speaker 3: And also, you know, that's not that's not a contrarian
Speaker 3: thing even to say now. And a lot of the time,
Speaker 3: I think with these big pension organizations, the problem is
Speaker 3: that they've started a process rolling there's maybe like five
Speaker 3: years behind the times or something like that, and it's
Speaker 3: kind of like, oh, well, we must get more assets
Speaker 3: in private so we must get more money into private assets.
Speaker 3: But actually the time for doing that was ten years ago,
Speaker 3: and it's only just now that you're kind of catching
Speaker 3: up with it, because you know, I mean, there's the
Speaker 3: mansion house is one thing, and the mansion house stuff
Speaker 3: is that you've got to put ten percent of your
Speaker 3: assets under management into unlisted stuff and at least five
Speaker 3: percent of that has to be or half of the
Speaker 3: ten percent has to be in UK related assets. And
Speaker 3: that's I mean, I think that's a daft thing in
Speaker 3: the first place, but that's not the only driver. If
Speaker 3: you're looking at putting thirty percent and you're suddenly taking
Speaker 3: out half a billion of exposure to us VIC created it.
Speaker 3: So you know what, I do find it oid that
Speaker 3: there's this push for a full thood to be in
Speaker 3: unless the diocese when they can the iloquidity premium does
Speaker 3: not seem to be there at the moment.
Speaker 2: Yeah, yeah, interesting, and they haven't moved that far down
Speaker 2: this yet. I'm just having a look at some of
Speaker 2: the big chart in front of fifty less retirement date funds,
Speaker 2: including the startup fund blah blah blah. As I'm looking
Speaker 2: at the less retirement date fund in twenty fifty. I,
Speaker 2: if that's when you're going to retap, You've got forty
Speaker 2: two point five percent in climate aware global developed equities.
Speaker 2: Let's hope that's what you wanted. Five private credit, three
Speaker 2: point seven percent in rising obviously small amounts of bonds,
Speaker 2: bond bond liberal, a bit of sterling, infrastructure equity three
Speaker 2: point two renewable equity, infrastructure, and then private actually comes
Speaker 2: in at four point four. So in most funds you're
Speaker 2: still under ten percent private credit, private assets in general,
Speaker 2: as far as I can see you arising.
Speaker 4: Yeah, infrastructure, get something else?
Speaker 2: No? Is it infrastructure?
Speaker 1: Yeah?
Speaker 3: And also I think I think, yeah, I was looking
Speaker 3: at I was just looking at SETI wire for at
Speaker 3: all view.
Speaker 4: This morning I read.
Speaker 3: An article, a recent article the other that said this
Speaker 3: whole idiot fifteen percent overall.
Speaker 4: So well, I'm looking at rather than specific.
Speaker 2: Yes, exactly. Well, I'm looking at the retirement date funds, which,
Speaker 2: by the way, the ones that the most people will own.
Speaker 2: I think these are the defaults. But there's also the
Speaker 2: growth fund, which I'm not looking at right now, but
Speaker 2: I would imagine probably a higher allocation to private. But
Speaker 2: I tell you what there is not an obvious and
Speaker 2: direct allocation too is yes, you guess did UK equities?
Speaker 4: Yeah? Yeah, I was looking for that.
Speaker 3: That's what I was looking for this morning because we
Speaker 3: were briefly we sort of mentioned maybe tomby price controls
Speaker 3: and I wanted to look at who Tesco shareholder base was,
Speaker 3: and I was kind of looking at, you know, pension
Speaker 3: funds and obviously Tescos is owned by a lot of
Speaker 3: different institutions, and obviously Nest does own some Tesco via
Speaker 3: other pension funds. But yeah, I was kind of like
Speaker 3: flitting through all the kind of funds and yeah, there
Speaker 3: is no listed there's no specific UK equities go here,
Speaker 3: And I think that's that's wrong.
Speaker 2: You know, Yes, I mean, here are you looking at
Speaker 2: something with this and this extraordinary level of aum, with
Speaker 2: going on fourteen million UK workers and vested in it.
Speaker 2: And maybe maybe you would say, well, you know, if
Speaker 2: if the people who hold this punch of fund are
Speaker 2: already working for the big UK companies, then maybe we
Speaker 2: should diversify them by holding holding equities. I mean, that
Speaker 2: would be one way of looking at it, I guess,
Speaker 2: but I'd be more likely, I think, to think we'll
Speaker 2: hang on a check. With all this money, you could
Speaker 2: have a genuine influence on the UK market. Will you
Speaker 2: to decide to use it?
Speaker 4: Yeah?
Speaker 3: And I mean all you're really doing then is leaving
Speaker 3: the you know, the way open to you know, the
Speaker 3: black Rocks and the vantguards this world, or the Norwegian
Speaker 3: pension fund. I'm not saying that any of them have good,
Speaker 3: bad intentions, but if you've got a UK domicile, UK
Speaker 3: funded massive pension fund, then you know, I mean, it's
Speaker 3: the closest thing in an SWUF that we will ever get.
Speaker 3: So you know, the idea that is not really like
Speaker 3: it's only taking a negligible steak in British listed companies
Speaker 3: in British financial infrastructure feels like a missed opportunity.
Speaker 4: Is that how they put it?
Speaker 2: Maybe this is another thing, and this for those of
Speaker 2: you running nest pensions, this is active advice. Why don't
Speaker 2: you send emails to everybody invested in all your giant
Speaker 2: funds and ask them what they would like? Would they
Speaker 2: like you maybe to invest less in American private equity
Speaker 2: and private credit and maybe a bit more and already
Speaker 2: listed not particularly expensive UK equity is just an idea.
Speaker 2: But where we're super proch held a democracy.
Speaker 4: Help me, John, Yeah, and I.
Speaker 3: Think that your basic point you want to get people
Speaker 3: more involved, and it's possible to get people more involved,
Speaker 3: And yeah, you're right from the education point of view. Yeah,
Speaker 3: I mean the fund provide employee is the best one
Speaker 3: to do it, or at least to be lumbard with
Speaker 3: that particular responsibility.
Speaker 2: Yeah.
Speaker 1: Right.
Speaker 2: There's one other thing I wanted to talk about today,
Speaker 2: and it's kind of connected. Actually, it's about be knowledgeable,
Speaker 2: be aware, be on top of this stuff. Know what
Speaker 2: is happening to your investments. And you know, John, nobody
Speaker 2: hates ADMIN more than I do. You don't even at
Speaker 2: admin as much as I do.
Speaker 4: Right, we would need to have a proper competition of it.
Speaker 4: I have to see to see.
Speaker 2: I reckon we could find it. I neglect it more
Speaker 2: than you do. But anyway, under that, but you've got
Speaker 2: to be on top of the stuff. Now. One of
Speaker 2: the things I wanted to talk about was this report
Speaker 2: that it was not really more of a comment a
Speaker 2: thought of the day from one of our favorite analysts
Speaker 2: at Pamel Liberian, and he points it out that there's
Speaker 2: a study from Germany which shows that the advice you
Speaker 2: were given. The investment advice that you were given in Germany,
Speaker 2: by the way it is not here, differs by gender.
Speaker 2: So here are the things. Women are six percent less
Speaker 2: likely to get a rebate on a fund they invest in,
Speaker 2: and if they do get a rebate, they get a
Speaker 2: significantly lower one than men get. At the same time,
Speaker 2: they're more likely five percent more likely. I mean, you'll
Speaker 2: say that not enough to be statistically significant in it,
Speaker 2: but I'm gonna still think is five percent more likely
Speaker 2: to get a recommendation to invest in an in house fund.
Speaker 2: The wont about that being, of course, that the wealth
Speaker 2: management company in question will make it way more money
Speaker 2: and fees on an in house fund than an out
Speaker 2: of house fund, and more likely to be recommended in
Speaker 2: in house multi asset funds to make I make a
Speaker 2: lot more money from that. At the same time, sixty
Speaker 2: three percent of men get a recommendation to invest in
Speaker 2: the most expensive funds in any particular category, but seventy
Speaker 2: three point two percent of women get that recommendation. So
Speaker 2: what you've got here is, again I repeat, not here
Speaker 2: in Germany, a very clear division. And again you'll say
Speaker 2: it's only five or six percentage points. I think that's
Speaker 2: enough to make the argument a clear division between the
Speaker 2: type of advice given to different types of people. Now,
Speaker 2: I suppose the way for us to look at this
Speaker 2: is to say, let's not make this all about gender.
Speaker 2: It seems to be that what is happening here is
Speaker 2: that German wealth managers in IFAs automatically see their female
Speaker 2: clients as less financially sophisticated than their male clients, and
Speaker 2: so give different types of advice. I make as much
Speaker 2: money as they can get away with from each class,
Speaker 2: and they think they can get away with more with
Speaker 2: their less sophisticated class. You could take gender out of it, right.
Speaker 3: I think yeah, I think you could. And we've often
Speaker 3: discussed that there are some frustration frustrating assumptions made about
Speaker 3: women and investing in men about investing that probably don't
Speaker 3: really hold true or certainly aren't about gender. But I
Speaker 3: think you get that is an absolutely fair point about
Speaker 3: seeing someone that you're assuming to be less sophisticated and
Speaker 3: then but presumably actually getting away with it because I'm
Speaker 3: assuming that the advice that's been given here is the
Speaker 3: advice that's actually followed. I mean, obviously, yeah, okay. I mean,
Speaker 3: you can quibble with the statistical significance, although at the
Speaker 3: same time it's a big study. I mean they looked
Speaker 3: at about twenty seven thousand real world meetings between people,
Speaker 3: so you know, maybe you know, all of that kind
Speaker 3: of holds up. But I think the lesson really isn't
Speaker 3: This goes back to, as you say, what we were
Speaker 3: saying earlier. If you don't want to get taken advantage of,
Speaker 3: then you need to know something about this stuff, whether
Speaker 3: you like it or not, or you need to know
Speaker 3: someone that does it. It's a bit like if you're
Speaker 3: going by a used car, normally ideally take a man
Speaker 3: or take a pal that knows something about cars.
Speaker 4: I mean, don't take me, I know nothing.
Speaker 2: I think there have been several studies that it doesn't
Speaker 2: matter how little your man friend knows as long as
Speaker 2: you take them with you.
Speaker 4: Well okay, well in that case is just sex. It's
Speaker 4: quite hard.
Speaker 2: Not that much of that, not much of that pure
Speaker 2: sexism left in British society.
Speaker 3: I would say, yeah, to be feeling Britain is actually
Speaker 3: you know, and I'm not just saying this pure jingoism.
Speaker 4: If you look at you know, like EU.
Speaker 3: Studies on things like race, for example, then Britain's actually
Speaker 3: well in advance of most kind of European countries when
Speaker 3: it comes to that, so I would get something similar.
Speaker 3: It's true for sex as well. You know, I couldn't
Speaker 3: swear to that, but.
Speaker 2: Yeah, anyway, clear message, clear message. If you don't know
Speaker 2: much about finance and investing when you go to see
Speaker 2: a wealth manager, take someone with you or an IFA,
Speaker 2: take someone with you who does, or.
Speaker 3: You know you could do if you can't find a
Speaker 3: friend who knows something about it, first thing you do
Speaker 3: when you go in. As you see, I was listening
Speaker 3: to that Merriton Talks Money podcast the other day, you know,
Speaker 3: just casually drop that any conversation, drop that in.
Speaker 2: And then you could say to them and you should
Speaker 2: listen to that too, yes, yes, yes, yeah, some them
Speaker 2: the link.
Speaker 3: We'll just post out popularity with the IFA community there again.
Speaker 2: Well no, I mean, I think we've been historically critical
Speaker 2: of the IFA community, but also occasionally very prison of
Speaker 2: the IFA and the wealth manager community. I mean, I
Speaker 2: think they provide an extremely valuable service. Not everybody wants
Speaker 2: to do things themselves. That's interesting, I think because there's
Speaker 2: been a change in my way thinking. When we first
Speaker 2: started out, John all those years ago, I was absolutely
Speaker 2: determined that everybody must do everything for themselves. Everyone had
Speaker 2: to gala grab and manage their own money, et cetera,
Speaker 2: et cetera. And the years have gone by, I realized
Speaker 2: that it's just stupid, never gonna happen. And you know,
Speaker 2: most people they don't want to. They don't want to,
Speaker 2: They've got enough to do. And also crucially not that
Speaker 2: they don't want to do the admin admin admin admin.
Speaker 2: They also they don't want to stress. Most people do
Speaker 2: not want to wake up in the middle of the
Speaker 2: night wondering about what's happened to their money, and in
Speaker 2: difficult times, they don't want to be constantly checking their
Speaker 2: portfolio except do you know what they want They want
Speaker 2: someone else to do that for them.
Speaker 4: Yeah, I mean this speaks sense.
Speaker 2: No, no, no, I don't want to.
Speaker 3: I mean so, yeah, I mean to be fair, Yeah,
Speaker 3: I mean we get change people they do things and
Speaker 3: they know and professionals to do stuff.
Speaker 4: You know, I don't.
Speaker 3: I certainly don't want to find myself either. So yeah,
Speaker 3: it's definitely there's a function. There is just that the information,
Speaker 3: the semetery was always the problem and I don't think
Speaker 3: it's anybody near this bade now, partly because we get
Speaker 3: ready commissions, which is clearly one thing that this German
Speaker 3: study is refiled in too, which is no longer the
Speaker 3: case in the UK exactly.
Speaker 2: We have the we shall just be from review in
Speaker 2: the UK which changed the landscape completely and in the
Speaker 2: main for the good few things so to be ironed
Speaker 2: out from that there's been a long time but in
Speaker 2: the main very good, right John, Is there anything else
Speaker 2: that we need to add to this?
Speaker 3: I feel the world has been put to rates in
Speaker 3: a regulous miner, thank goodness.
Speaker 2: Anyway, So the key bit of advice is really I mean,
Speaker 2: I know you don't want to, but you need to
Speaker 2: know what's going on, and if you are with any
Speaker 2: of these big pension providers, just you know, email them,
Speaker 2: let them know what you think.
Speaker 5: Always worth doing, right, Thanks John, Thanks Mal thanks for
Speaker 5: listening this week more and took your money.
Speaker 2: If you like show rate review and subscribe wherever you
Speaker 2: listen to podcasts or so if you short to follow
Speaker 2: me in John on ex or Twitter at marins w
Speaker 2: and John Underscore step Back. This episode was produced by
Speaker 2: Somersidi and Moses and Christens. And comments on this show
Speaker 2: and all our shows are always welcome. A show email
Speaker 2: is Merimney at Bloomberg dot next