Critics Slam UK Pension Scheme for Adding Bitcoin to Portfolio

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Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

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Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

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November 27, 2024 23:39 EST

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A UK pension scheme has reportedly been slammed as irresponsible for investing in Bitcoin.

This month, news broke that the scheme became the first in the UK to allocate 3% of its portfolio to Bitcoin. The £1.5m investment, drawn from its £50m asset pool, aimed to boost employee returns. The move came just before Bitcoin’s price surged significantly after Donald Trump’s election victory.

Sky News reported Wednesday that several experts criticized the pension fund’s decision, warning it risked “gambling with retirees’ futures.”

Finance Experts Debate the Role of Bitcoin in Pension Funds

Colin Low, managing director at Kingsfleet, called the move “strange.” He argued that pension funds should prioritize long-term investments instead of speculative bets. Low pointed out the irony of a fund with such a long investment horizon risking beneficiaries’ assets on Bitcoin, which he believes lacks intrinsic value.

Daniel Wiltshire, an actuary at Wiltshire Wealth, called the investment “deeply irresponsible.” He stressed that pension trustees must manage assets cautiously and urged the UK financial watchdog to intervene for the members’ protection.

Meanwhile, Chris Barry, a director at Thomas Legal, said allocating under 5% to crypto is “sensible.” He urged UK pension funds to follow the example of their US counterparts, who have invested in cryptocurrency for years.

Pension Funds Push Boundaries with Bitcoin Amid Concerns Over Stability

Pension specialist Cartwright advised the scheme on its investment. Sam Roberts, Cartwright’s director of investment consulting, told Cryptonews the fund sought to diversify its portfolio. “Bitcoin now for pension schemes probably feels the same as equities felt in the 1970s,” he said.

Bitcoin’s price swings typically don’t align with the risk profile pension funds prefer. These funds are expected to focus on stable, long-term growth, not high-risk, speculative assets like cryptocurrencies. Critics argue that Bitcoin’s volatility could lead to significant losses, putting retirees’ financial security at risk.

The UK’s Financial Conduct Authority (FCA) has warned about the high risks of cryptocurrencies, advising people to invest only what they can afford to lose. This caution underscores concerns about adding such assets to pension portfolios meant to protect retirement savings.

Despite concerns, pension funds worldwide are starting to explore cryptocurrency investments. Last month, Florida’s Chief Financial Officer, Jimmy Patronis, proposed creating a Bitcoin reserve and adding it to state pension funds. In May, the State of Wisconsin Investment Board (SWIB), the ninth-largest US pension fund, invested $99m in Bitcoin.