Distributed ledger technology will help us build a new infrastructure that will secure our retirements
By Anastasia Andrianova
Worrying revelations about the extent of the pensions crisis are emerging across the world. The UK now has an estimated $4 trillion retirement savings shortfall — projected by experts to rise 4% a year and reach $33 trillion by 2050.
In Spain, a pensions surplus that once stood at €66b is now almost completely depleted after two years of questionable siphoning practices. In the US, the pensions deficit could force multiple states into bankruptcy, according to a recent Harvard study.
Meanwhile, the World Economic Forum predicts that the pensions deficit will reach $400 trillion by 2050 — about five times the size of today’s global economy.
The pensions system is simply no longer functional. Cost inefficiencies are decimating savers’ pots, mismanagement is rife, and programmes are mired in complexity. Meanwhile, retirements are getting longer and more expensive as life expectancy rises. Individuals who have contributed to funds for decades are stuck in schemes which may not deliver their pensions. Meanwhile, alienated younger generations struggling with soaring rents and property prices aren’t saving enough for the future.
A lack of transparency lies at the heart of this pensions crisis. Just when people need as much useable information as possible to safeguard their jeopardized futures, it is far too difficult to understand the benefits and shortcomings of different pension programmes. Even Andy Haldane, the chief economist of the Bank of England, has admitted he doesn’t understand either workplace or High Street pensions.
The consequence is that savers are struggling with the most important financial decisions of their lives, without the information they need to make them. Meanwhile, they encounter debilitating friction and hassle if they want to move from one pension to another — causing many to stay put in poorly performing or precarious pensions to avoid complexity. Against this depressing backdrop, everyone remains at risk from pension raids and broken promises from companies and governments.
A surmountable problem
But the problems we’re facing, although grave, are by no means insurmountable. In fact, the pensions crisis might even be on the brink of being fixed — thanks to blockchain technology.
The beauty of the blockchain is that no single entity is in control of the ledger — transparency can be built in at the protocol level. And once data is inputted, it can’t be erased or edited. This could be vital for the integrity of pensions.
Even more importantly, a blockchain-based pensions ecosystem, built could utilize emerging smart contract technology to ensure exclusive delivery funds to beneficiaries, eliminating the risk of fund seizures or hidden costs. Safe in the knowledge that their funds will remain absolutely safe from raids by companies or governments, consumers of a blockchain pension system will enjoy now-impossible security.
A pensions blockchain would also make it easy for people to move between funds as every pensions occurrence would be logged on the ledger forever. This would promote better competition among pensions providers, and consumers would find it easy to find pensions that suit them.
An ecosystem for funds
This new ecosystem would also directly connect investment fund managers and financial institutions — bringing much-needed clarity and cutting out the middlemen that siphon value out of investments.
Meanwhile, institutional participants could be incentivised for accountability, transparency, and the delivery of timely pension accrual and remittances. Participants could give funds and organisations ratings, which would be accurately and immutably stored on the blockchain for everyone to see – allowing others to make better-informed choices when it comes to picking a pension plan and eliminating under-informed and oftentimes costly mistakes.
Users might even be able to monetise their invaluable personal and financial data — anonymously if they chose — and access a variety of savings products and services.
Pension funds and fund managers would benefit, too, from reduced regulatory overheads, and improved direct access to clients.
To ensure mass adoption, such a pensions ecosystem must be accessible to individuals on user-friendly mobile apps and tools. These might include portable digital wallets that detail historical pensions contributions, private savings and pension data, as well as records of corporate contributors’ formula-based contributions. All this would mean a modern mobile worker would no longer need to chase historical employee contributions across various jurisdictions.
Of course, this new system won’t solve the whole of the pension crisis, at least not entirely. By rebuilding it from the ground up, though, a blockchain platform would eradicate the costly leaks in the rusted pension fund pipeline in use today.
In recent times, the will among savers to keep throwing money into a pension fund industry has been understandably waning. But a transparent, smart-contract-based pension fund infrastructures, built on the blockchain, could restore trust and usher in a new era of responsible, transparent saving. It would make risks more foreseeable, and increase our ability to avoid them, or at the very least remain resilient to them. Decentralised pensions on the blockchain are, without a doubt, the best route to a safer financial future worldwide.
About the Author:
Anastasia Andrianova, ex Lehman Brothers and now CEO and Founder of Akropolis, a blockchain pensions platform for the next generation of savers. Ana is one of very few female chief executives in the blockchain world, and is an experienced investment professional, business builder and technology and data expert. She sits on the advisory board for the Web3 Foundation, serves as a board advisor and investment committee member of the EU industrial IoT incubator (OpenMaker Project) and is a member of the Blockchain Ecosystem Network.
Not company earnings, not data but vaccines now steering investor sentiment
By Marc Jones and Dhara Ranasinghe
LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.
Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.
Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.
“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.
“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”
The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.
Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.
But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.
(Graphic: Vaccinations per 100 people by country, https://fingfx.thomsonreuters.com/gfx/mkt/azgvolalapd/Pasted%20image%201611247476583.png)
SHOT IN THE ARM
Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.
Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.
Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.
“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.
The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.
Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.
“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”
The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.
Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.
Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.
Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.
“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”
(GRAPHIC: Renewed surge in COVID-19 across Europe – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbejqwpq/COVID2101.PNG)
(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)
BlackRock to add bitcoin as eligible investment to two funds
By David Randall
(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.
The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.
The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.
A BlackRock representative declined to comment beyond the filings when contacted by Reuters.
Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.
Bitcoin tumbled 10.6% in midday U.S. trading Thursday.
Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.
“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”
There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.
BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (https://bit.ly/2XXFHrB)
(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)
Bitcoin slumps 10% as pullback from record continues
LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.
The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.
Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.
(Reporting by Julien Ponthus; editing by Tom Wilson)
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