The LIBOR rate rigging scandal potentially affects every pension fund in the UK. With more than $3trn (91% of GDP) invested in pension schemes in the UK, the cost of bankers rigging the interest rate applied to these pensions could easily have cost pensioners billions. The custodians of these pension funds – banks, private sector fund managers and local government – should be taking action to get our pension money back – but it would appear they haven’t lifted a finger.
What on Earth is LIBOR?
Many will, by now, have heard about the LIBOR scandal. For those who haven’t, a recap. Others might wish to skip to the next section.
According to the National Audit Office, The UK National Debt rose by £850bn as a result of the Bank Bailout. This is almost twice the nation’s total annual budget. For this amount, the UK could have funded the entire NHS (£106.7bn a year) for eight years , our whole education system for twenty years (£42bn a year) or provided two hundred years of Job Seekers Allowance (£4.9bn a year).
While the banks were approaching the taxpayer with a begging bowl, they were simultaneously rigging the basic rate of interest, in order that they could make profit from the bailout deal, whilst taxpayers, pensions and savers suffered losses.
Serious questions about the rigging of the LIBOR rate have been around since 2005. In June 2012, Barclays was found guilty by the FSA of rigging the rate and given a fine of just £290m by UK and US regulators. None of the traders who profited for perhaps a decade from breaking the law were taken to court, put in jail, or had their personal fortunes & bonuses (earned via rate manipulation) diminished.
By August 2012 it was announced that seven banks were to face legal questioning in the US. This year, RBS – a bank now 81% owned by the British tax payer – agreed to pay a £500m fine to settle the issue with US and UK regulators. However, this effectively makes the British tax payer (the victims of the RBS fraud) the bill payer for the criminal activity of RBS. In any case, the RBS fine represents just 5% of 2007 profit – hardly a disincentive!
Chancellor George Osborne is making strident comments that the bankers would need to pay the fine from their bonuses, but after a string of U Turns on policies designed to tighten banking regulations and break up banks, one would have to be an optimist of the highest order to place any faith in such empty promises.
How it works: Bank commits financial terrorism; bank gets caught committing financial terrorism; tax payer pays for bank to commit financial terrorism.
LIBOR and Your Pension
The issue here is that many pension funds use the LIBOR interest rate as the performance benchmark for their schemes. In fact, more than 300 pension funds across Europe do so. This means the value and performance of these pension funds, and fees payable to fund managers, were directly correlated to the LIBOR rate that bankers were actively rigging both up and down on a daily basis, and downwards over the longer term.
While Banks like UBS, Barclays, RBS and others were deliberately manipulating the LIBOR rate down, to increase their own profits – annual returns on pension schemes across the UK and Europe were being devalued as a result.
Then Came QE and the Interest Rates
On top of the devaluation of pension funds caused by LIBOR, the Bank of England was also busy pumping £600bn of free money into the banking sector through Quantitative Easing (printing money). The IMF warned the Bank of England this month that it faces making potential losses of up to £80bn (5.5% of GDP) as a result of the QE scheme.
The Bank of England has also kept interest rates artificially low, dropping from 5% in 2007 to just 0.5% today. This is sold to the broader public by the savings consumers can make on their mortgages. However, as financial analyst Max Keiser has repeatedly pointed out: for every £1 saved through QE, £2 is lost on savings and pensions.
In short, whatever benefit we see on our mortgage today, will be paid back twice by our pension and savings for later life – when we will be little able to do anything about it.
Act Now or Lose Out
The reason the regulatory authorities took so long to respond to the concerns over LIBOR rigging raised by US regulators becomes clear when we take a look at the Statute of Limitations. As LIBOR rigging has been allowed to run on so long, from September this year, instances of this fraud begin to fall under the statute and become unpunishable in a court of law. If we do not act, they will simply get away with it.
“The impact of Libor manipulation on pension funds is hard to pin down, and could have happened through a range of financial instruments. Pension fund trustees should ask their fund managers to tell them if and how their assets have been affected.”
Therefore, for us to find out the true scale of pension pilfering that took place, as a result of the LIBOR rate rigging – we will have to ask for ourselves and demand MP’s take action. Our advocates are not doing their job.
If we do not take on this task, we will face diminished pension funds in our old age and those responsible will be retiring with gold plated pensions. These people should be held to account, not held in the highest esteem by our elected representatives.
This is especially important as the Government threatens to delve into pension funds of people in the public sector – NHS workers, council workers, firemen and the police who had nothing to do with the bankers crisis but increasingly are being forced to pay via job losses and privatisation.
The pigs have been well and truly at the trough, hoovering up tax payer money in bailouts whilst simultaneously raiding our pension schemes through LIBOR – meanwhile they have been ably assisted by a complicit UK Government and Bank of England who have kept the financial and legal conditions in their favour. It’s time to take back the trough.
Finally, email the responses to the email on the ‘About’ page of this blog. Together we can discover the true extent of this crime, and use this information to apply pressure on those in power to get our money back, and hold those responsible for pilfering it to account.
Contact Share Action, a pension fund advocacy campaign group for further advice
Go to Move Your Money and take your money out of this corrupt banking sector which only exists to serve itself.
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NOTE OF CREDIT: Today’s article was co-written with Joel Benjamin of Move Your Money.