Kevin writes: ‘I must have been mistaken: the true purpose of a pension fund must be to finance a flutter on the housing market.’
When I first joined the world of insurance, it was explained to me somewhat cynically that banks borrow short term from depositors, and use the money to speculate with. If the bet turns sour and depositors want their money back, it goes horribly wrong very quickly.
Insurance companies, by contrast, borrow long term from future pensioners and use the money to speculate with. If the bet turns sour, it takes about 20 years for things to go horribly wrong, after the prime movers are safely retired (preferably not with a pension for the firm they worked for).