Slowly but surely, Bitcoin is starting to play a bigger role in pensions.
A scheme has just become the first in the U.K. to allocate 3% of its portfolio to BTC, in the hope of delivering greater returns for employees.
That’s equivalent to £1.5 million of its £50 million in assets under management, with the purchase made just before the dramatic bull run triggered by Donald Trump’s election win.
But unfortunately for Britons hoping to emulate this strategy, it isn’t available to everyone — and it may take time for crypto to become an established part of retirement plans.
The pension fund was advised by a company called Cartwright, which specializes in managing defined benefit schemes that give employees a fixed monthly income in later life. This is typically based on their length of service, as well as the size of their salary.
Many British workers have an alternative known as a defined contribution scheme, where the cash they receive after retirement is based on what they and their employer pays in.
Cartwright’s director of investment consulting, Sam Roberts, told Cryptonews that the pension fund had been looking to diversify its holdings, adding:
“They’ve got equities, they’ve got some property, they’ve got some bonds — a mixture of what might we thought were traditional asset classes. We think of them as traditional now, but equities really only came in for pension schemes in the 1970s. Bitcoin now for pension schemes probably feels the same as equities felt in the 1970s.”
Is It Too Risky?
Some retirement fund providers in the U.S. have started to dabble with Bitcoin in recent years, only to be met with stern criticism from politicians who fear cryptocurrencies are far too unpredictable to earn a place in portfolios. Back in 2022, Senator Elizabeth Warren wrote to Fidelity, and also raised concerns about “significant risks of theft, fraud and loss.”
Roberts says Bitcoin allocations within British pension schemes do need to be treated with care, but other asset classes such as stocks and shares can also be susceptible to volatility.
“If you’ve got, let’s say, a 10-year time horizon, or even a five-year time horizon, and you buy a volatile asset, you’ve got time to allow the price to do what you expect it to do, which, of course, is to go up.”
He added that a 3% BTC allocation is relatively small — enough to make a noticeable impact if the cryptocurrency delivers outsized returns, but not calamitous in the unlikely event that it ends up crashing to zero in the years to come.
“We did a lot of analysis around what’s the real impact of holding Bitcoin. But in any volatile asset when you’ve got an asymmetric risk-return profile, I expect more chance of it being positive than negative. In this scheme we’ve got a 10-year time horizon. We did some analysis and said ‘Okay, what if you buy Bitcoin and then it immediately falls to zero? What does that do for your 10-year time horizon?’ It extended it to 10 years, three months. Okay, well, let’s take the opposite scenario. What if now it does really well? The time horizon was dropping to nine, eight, seven years.”
Roberts went on to stress that keeping these holdings secure is a priority — and in Cartwright’s eyes, “Bitcoin is the only credible institutional-grade cryptocurrency.”
That brings us to a bigger question: is education being offered to the participants in this pension scheme? Do they have a mechanism where they can opt in or opt out?
Roberts explained that trustees are responsible for determining the investment strategy — and get extensive training and support to ensure they are compatible making allocations on behalf of the fund’s beneficiaries.
“They must be prudent. They must make sensible decisions. And actually, when we were looking at this, I think you could certainly come to the conclusion that you’re not being prudent if you have a long-time horizon and are not considering Bitcoin.”
When asked whether he thinks more pension schemes should start making their own allocations, he believes it’s an idea that should be taken seriously — as Bitcoin has proven itself to be an inflation-resistant investment.
“I think we’re already starting to see that. The U.S. tends to be a bit of a leader in these kinds of technological advances, which is what Bitcoin is. We’re already seeing large pension schemes dip their toe in the water. We’re already seeing companies dip their toe in the water.”
What Investors Think
The latest official estimates from the Financial Conduct Authority suggest more than five million British adults now own cryptocurrencies — but would it occur to any of them to include Bitcoin in their pension plans?
Enthusiast Ani Naqvi told Cryptonews that she would be willing to have 100% of her pension in BTC because it’s one of the few financial assets that’s deflationary in nature, adding:
“It will only go up in the long run, unlike other stocks and shares that will fluctuate. If you are in Bitcoin for the long term, there is only a win-win possible.”
She admitted that BTC’s closer ties to Wall Street undermine the cryptocurrency’s initial ambition of serving as an alternative to traditional finance — and given some ETF providers have ties to arms and gun manufacturers, this could pollute the digital asset’s integrity.
“Normal investments simply aren’t ethical enough, and ethically named products are not really ethical at all. Crypto is one huge way people who want to invest ethically can. It is extremely difficult to trace back every single product from your pension plan, whereas you don’t have that problem with a 100% crypto portfolio.”
But Patrick Reid, the co-founder of the financial consultancy Adamis Principle, fears much greater caution is needed — and pension schemes shouldn’t jump into Bitcoin until it’s a more mature asset, even in small allocations.
“The volatility of 3% can out move say a 15% allocation in certain less risky assets.”
While Reid does believe that Bitcoin’s value will continue to rise in the decades to come, he warned there will be regular reversals of up to 60% along the way — and that may be too much for some investors to stomach.
“Please ignore the zeal and treat it just like a regular asset. Ignore the conspiracy theorists and anti-government types. Do your due diligence and please be patient when investing in it. Also, and it goes without saying, please don’t risk more than you can afford. Pension funds by default are supposed to be less risky.”
With the crypto markets racing to new heights, there’s little doubt that Bitcoin will start to be scrutinized more closely by Britain’s multi-trillion dollar pension sector.
The post Bitcoin is Coming to UK Pensions — Will It Be Popular? appeared first on Cryptonews.
