Pensions Brainwashed by 'Twitter Effect,' Leading Investor Says

(October 10, 2010) — The head of the National Association of Pension Funds (NAPF) has blamed the ‘Twitter effect’ for hurting pension schemes, and amid growing pension deficits at some of Britain’s biggest companies, he fears that short-term mindset to measure investments will become more and more apparent.

Lindsay Tomlinson, the chairman of the NAPF, said the “Twitter effect” has significantly contributed to the pension industry’s propensity to make short-term investment decisions, The Guardian is reporting. “As a pension fund investor, how do you make a 50-year investment decision using something like Twitter? I don’t know; I think it is an issue for us; and I think society is going to have to start to think about this issue a lot harder. It affects everything, not just pension investment,” Tomlinson told the NAPF’s annual conference in Liverpool.

Tomlinson, a fund manager who is also a director of the Financial Reporting Council and chairman of the Takeover Panel’s code committee, said pensions are increasingly driven to respond to modern society’s demands for instant gratification, a culture illustrated by the nature of short, 140-character long tweets that crowd the social messaging site.

He added that rule changes over the last three decades — spurred by demand for trading profits, mark-to-market accounting reforms, and regulations that call for reporting of short-term gains and losses — has encouraged pensions to ignore long-term consequences, according to The Guardian. Three issues he highlighted driving the short-term debate: 1) The industry’s nature of being overloaded by trivial information, 2) investment agents seeking to satisfy the interests of investors while looking to increase confidence, and finally 3) the propensity for investors to be “slaves” to the economy and markets.

Pension fund deficits are increasingly plaguing pensions in the UK, reflected by the growing demands put on the Pension Protection Fund (PPF), which backstops failed corporate pensions, as experts have warned that the fund is being overstretched and may soon have to reduce the amount it pays out. A recent study by KPMG showed that 32% of FTSE 100 firms are struggling to fill gaps in their pension deficits from current discretionary cash flow, with pension deficits of FTSE 100 companies jumping by £15 billion this year to £65 billion.