FT: Governments cast a hungry eye over public piggy banks (like the PIC)

Key topics:Luxembourg plans national defence bonds to fund military spending.Governments eye private wealth to ease high debt and fund projects.Pension funds resist coercion despite pressure for domestic investment..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Katie Martin.Your country needs you. Or, more accurately, it needs your money. One way or another, it will find ways to try and get hold of it in the coming years.Tiny Luxembourg may end up showing the way. In October, the government there published a framework for national defence bonds — an innovation, it said, that would be the first from any European country in the 21st century. It hopes that, once approved, these plans will lead to the first bonds in 2026.“By issuing defence bond(s), the Grand Duchy of Luxembourg aims to reinforce its commitment to safety and defence in Europe,” the framework reads. “National defence bonds could become key financing instruments to support a country’s efforts and ambitions while providing national and international investors with the opportunity to diversify their investments.”This draws on the experience of other countries in Europe such as Italy, which led the way with bonds aimed directly at retail investors. Luxembourg’s efforts, however, have more of a feeling of rallying around the flag, given the specific requirement for spending on defence of the nation. Tax breaks and other incentives could be layered on to sweeten the deal if patriotism alone is not quite enough to entice buyers, potentially a win-win for all concerned..Read more:.Spending factors that can drain your retirement funds faster than you anticipated - Keep an eye on spending in retirement .Defence bonds, an echo of the historic British war bonds, are, in a strange way, the cuddly face of a scary-sounding practice known as financial repression — the idea that governments will find a way to relieve citizens of their hard-earned wealth. This is already a hot topic in markets, as governments are running into the danger zone of sky-high debt issuance, leaving politically unpalatable tax rises and spending cuts as the only option to balance the books. The general public’s pots of money are enticing not just for defence, but for high spending needs in infrastructure, green energy and ageing populations.“If you look at country balance sheets, you have high levels of debt in many countries, and on the other side of the balance sheet you have very high levels of private wealth,” said UBS economist Paul Donovan in a recent presentation. That money “could be encouraged or coerced to finance debt in some way”, he said, under the banner of “mobilising private wealth” — a big theme for 2026.Governments are already grasping the nettle of suggesting that pension schemes should buy local, and possibly even be obliged to. “We need to put our capital where our mouth is,” Canada’s industry minister, Mélanie Joly, said in an FT interview in October, touting a new wave of “economic nationalism”.You could argue that Canada’s huge pension groups — the envy of much of the rest of the world — already do just that. Some have more than half of assets invested at home. But high spending needs in developed economies across the world make the trillions of dollars sitting in pension pots look like an alluring target. Grabbing more of it sounds like an elegant solution. It is hard to execute, however, without clashing heads with pension fund managers, who say they are more than happy to buy domestic stocks and bonds and help to fund national infrastructure projects, but only of their own free will. One senior official at a large pension scheme told me recently that nation-building projects were “exciting”, but added that the mere suggestion of coercion was deeply “awkward”. Some even fear it could lead to a new type of “crony capitalism”. In Canada, the UK and Australia, heavy-hitting pension managers are pushing back. “I’ve said this behind closed doors and in front of the cameras and I’ll say it again — it would be a disaster for members if governments tried to tell us what to invest in,” was how Paul Schroder, chief executive of the AustralianSuper pensions investor, put it in an address in September. “We must break the piggy bank mentality,” he said, adding that Super, as it is known, “cannot, and should not, be used to solve every complex national problem”.It is unfortunate that so much wealth ends up drifting in the direction of the US, which still accounts for around 60 per cent of global stock indices. But investors, particularly in pensions, have a duty to do the right thing for their stakeholders, and the vibrancy of US markets over recent years acts as a magnet to attract foreign funds.The onus really is on governments to do the basics like fostering growth and innovation, and to come up with projects and incentives with strong appeal at home and abroad. But they are clearly on the lookout for potentially easier wins. The coming years will be a golden age of incentivising private investors to back the home team. .© 2025 The Financial Times Ltd.

FT: Governments cast a hungry eye over public piggy banks (like the PIC)

Related Stories

What is a Family Office and do you need one

Stephen Roach on BizNews: Don’t mess with markets

Nouriel Roubini on BizNews: Where will the global bond rout hit growth and equities?

Jim O'Neill on BizNews: Why the US bond market is trembling