Key Post Why are small pension funds no longer allowed to borrow?

[MrEarl]

What are peoples thoughts on the fact that debt can't be raised ?

I always thought that a conservative level of debt, was fine - although I think there continued to be issues about the concentration risk (regarding overall exposure to property within a fund), and whether or not the property was truely let to an unconnected third party etc.

 

[time to plan]

Seems sensible to me because the state has in interest in people being able to support themselves (and the economy) in retirement. If debt can blow a hole in a retirement fund, I don't think the state should give tax breaks on that basis.

But it's a balance of risks argument with no right or wrong answer - just my opinion.

 

[Brendan Burgess]

That was one of the points made in the article. A good part of the pension fund is actually deferred tax which belongs to the government and not the owner of the pension fund.

Brendan

 

[Dave Vanian]

Borrowing to invest is, by definition, multiplying your level of risk as well as your potential return. It might work out very well for you or it might go badly wrong. If you want to take that level of investment risk, away you go but it shouldn't be done with the assistance of tax relief from the government.

That said, they have only closed it off to one type of pension - the Occupational Pension Scheme. Borrowing is still possible in all other types of pensions - PRSAs, Personal Pensions, Buy Out Bonds.