UK pension scheme called ‘deeply irresponsible’ for investing in Bitcoin
A UK pension scheme has been branded “deeply irresponsible” after investing in Bitcoin.
The unnamed defined-benefit scheme became the first in the UK to make the plunge, using 3% of its assets to buy into the cryptocurrency last month.
Pension specialist Cartwright acted as an adviser to the scheme and said the allocation was a “strategic move that not only offers diversification but also taps into an asset class with a unique asymmetric risk-return profile”.
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It claimed its approach meant the scheme could benefit from a significant potential bonus while limiting the possible negative outcomes.
But some experts seem less enthusiastic about the decision, warning it bordered on “gambling with retirees’ futures”.
“This is a very strange decision. Pension funds should surely be investing for the long term rather than speculating over the short-term,” Colin Low, managing director at Kingsfleet, told Newspage.
“It is ironic that a pension fund, having one of the longest investment time horizons, should speculate its beneficiaries’ assets on something that has no intrinsic value.”
Daniel Wiltshire, actuary at Wiltshire Wealth, added: “This is deeply irresponsible. Pension trustees have an obligation to ensure scheme assets are managed prudently.
“This precludes taking punts on a basketcase asset class like crypto. For the sake of the members, I hope the regulator is paying attention.”
Why are people so concerned?
Bitcoin is the largest and oldest cryptocurrency, although other assets like ethereum, tether and dogecoin have also gained popularity over the years.
Some investors see cryptocurrency as a “digital alternative” to traditional money – but it is very volatile, with its price reliant on larger market conditions.
Pension scheme trustees tend to be against taking big risks with retirees’ funds.
Advice from the Financial Conduct Authority states “you should never invest money into crypto that you can’t afford to lose” and warns people to be prepared to lose all their money.
And, while a 3% allocation doesn’t sound like a lot, it’s enough to make an impact on the pension fund’s performance.
This means that if Bitcoin continues to skyrocket, it could boost the scheme in a big way, but equally if it sinks, it could have a significant negative impact.
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As a defined pension scheme, it does mean the risk is being taken by the employer should there not be enough assets to meet future pension payments, rather than being borne by members.
Laith Khalaf, head of investment analysis at AJ Bell, says plenty of people have bought crypto personally, but it’s harder to make the case for investing in it to diversify a pension portfolio.
“While the price of Bitcoin is currently riding high, in the past we’ve seen strong performance quickly giving way to dramatic price falls. That in itself is a big hindrance to Bitcoin being adopted by consumers and businesses as a means of exchange,” he says.
“If you think Bitcoin is the future of currency despite its volatility, ask yourself if you’d be willing to be paid by your employer or billed by your mortgage provider in the cryptocurrency.
“It’s possible Bitcoin will thrive and prove its doubters wrong, but it’s also possible it will ultimately become worthless.”
Just last week, it hit a record high above $£99,000 – but less than two years before that it dropped below $17,000 following the collapse of crypto exchange FTX.
Some experts believe the potential pay-off means an investment in Bitcoin is a risk worth taking.
Chris Barry, a director of Thomas Legal, says that anything less than a 5% allocation is “sensible”, and UK pension funds need to catch up to their US equivalents who have been investing in crypto for years.
“Bitcoin is the top performing asset class over the past 10 years on average, even beating the NASDAQ. The direction of travel following Trump winning the US election is very bullish indeed,” he adds.
David Belle, founder and trader at Fink Money, has a similar view, saying a pension scheme portfolio is about numbers trying to deliver a return.
“A portfolio is just numbers made up of different betas, assets which either outperform or underperform a benchmark. Crypto is a fine asset class if it fits risk appetite.”
A £50,000 reward is being offered over the unsolved theft of a batch of early Scottish coins that were stolen 17 years ago.
More than 1,000 coins from the 12th and 13th centuries were taken from the home of Lord and Lady Stewartby in Broughton, near Peebles in the Scottish Borders, in June 2007.
The stolen haul spans a period of almost 150 years, from around 1136 when the first Scottish coins were minted during the reign of David I up to around 1280 and the reign of Alexander III.
The late Lord Stewartby entrusted the remainder of his collection to The Hunterian Museum at the University of Glasgow in 2017, but the missing coins have never been found.
Pic: Crimestoppers Scotland
Pic: Crimestoppers Scotland
Crimestoppers announced its maximum reward of £20,000 – which is available for three months until 27 February – in a fresh appeal on Wednesday. An anonymous donor is helping to boost the total reward amount to £50,000.
It is hoped it will prompt people to come forward with information which could lead to the recovery of the missing treasures and the conviction of those responsible for the crime.
Pic: Crimestoppers Scotland
Pic: Crimestoppers Scotland
Angela Parker, national manager at Crimestoppers Scotland, said Lord Stewartby’s haul was the “best collection of Scottish coins ever assembled by a private individual”.
Jesper Ericsson, curator of numismatics at The Hunterian, described the medieval coins as smaller than a modern penny.
He added: “Portraits of kings and inscriptions may be worn down to almost nothing and the coins might be oddly shaped, perhaps even cut in half or quarters.
“You could fit 1,000 into a plastic takeaway container, so they don’t take up a lot of space. They may look unremarkable, but these coins are the earliest symbols of Scotland’s monetary independence.
“They are of truly significant national importance. Their safe return will not only benefit generations of scholars, researchers, students and visitors to come, but will also right a wrong that Lord Stewartby never got to see resolved before he died.”
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Angela Parker, national manager at Crimestoppers Scotland, and Jesper Ericsson, curator of numismatics at The Hunterian. Pic: Crimestoppers Scotland
Mr Ericsson pleaded with whoever has the coins to “return them to where they belong”.
He added: “Give Scotland back its coins.”
Lady Stewartby said her husband, who was a renowned numismatist, was just five-years-old when he was given his first Scottish coin.
She added: “Over the next 50 years, he put together a collection which included some of the earliest Scottish coins.
“Lord Stewartby told me and our children that they represented Scotland’s history at a time when few people had access to books or pictures.”
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