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