- Financial advisers have condemned a UK pension fund’s decision to invest £1.5 million in Bitcoin
- Experts argue that Bitcoin’s volatility makes it unsuitable for safeguarding retirees’ savings
- Critics have warned that the move risks pensioners’ futures for speculative gains
An unnamed British pension firm which earlier this month committed 3% of its portfolio to Bitcoin has been labelled “deeply irresponsible.” The allocation, which was mooted earlier this month, amounted to £1.5 million ($1.8 million), but financial experts and advisers have denounced the decision as reckless, highlighting the risks associated with cryptocurrency’s extreme volatility. Many repeated the claims, made ever since Bitcoin’s creation, that it has no intrinsic value, in contrast to growing recognition in other countries that its decentralized nature is its key.
Pension Provider “Irresponsible and Reckless”
News of the potential allocation arrived earlier this month, but it wasn’t confirmed until very recently. The firm, for perhaps obvious reasons, has not been name, but mainstream media outlets and financial commentators have been quick to denounce it.
Daniel Wiltshire, an actuary and financial adviser at Wiltshire Wealth, was particularly vocal, calling the move “deeply irresponsible” and adding, “Pension trustees are obligated to manage scheme assets prudently. Speculating on a highly volatile asset like cryptocurrency is the antithesis of that duty.” Wiltshire emphasized that Bitcoin’s unpredictable nature could endanger the financial stability of pensioners who rely on consistent returns.
Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments, echoed these concerns, warning that trustees may struggle to justify the decision to regulators and members alike. “This blurs the line between seeking prudent returns and gambling with retirees’ futures,” McKeown said, pointing to Bitcoin’s history of dramatic price swings as a cautionary tale for pension fund managers.
Wilshere added that regulators should have powers to stop such investments:
This decision sets a dangerous precedent. It’s crucial for regulators to step in and ensure the focus remains on protecting pensioners, not chasing speculative gains.
Fundamentals Still Misunderstood
The debate underscores a growing unease about incorporating cryptocurrencies into traditionally conservative investment portfolios, an ‘oil and water’ mix that is understandably causing concern. Bitcoin’s advocates argue for its potential as a high-growth asset, with its value underpinned by its decentralized nature, but its critics continue to emphasize the potential for devastating losses. A single market downturn, they argue, could irreparably harm the financial stability of pension schemes.
The reactions came on the same day as the recently criticised financial regulator, The Financial Conduct Authority, revealed plans to consult on new regulations for the digital asset sector, as findings show the number of UK adults owning crypto has risen. The regulator’s latest research shows 12% of investors in the UK now own crypto, up from 10% cent in previous findings, while the average value of crypto held by people increased from £1,595 to £1,842.
