Neil Parfrey, head of pensions , says the scheme’s governance committee is currently re-examining its default funds after Chancellor George Osborne’s Budget changes liberalising how members can take their pension pots.
“If some of our members are trying to target cash at retirement, then the investment strategy required will be different from the way it is structured now to take them to buying an annuity,” he says. “We are in the process of analysing this and may end up with three different vehicles: for drawdown, for an annuity and for cash.
“The trick will be in finding out what our colleagues want to do. At the moment, the switching process in the lifestyle fund starts 10 years out, so we need some change because the current model is not fit for purpose. It also raises the requirement for [employee] education.”
In line with the Association of British Insurers’ code, the scheme has a governance committee, with an independent chairman, which meets quarterly.
Parfrey adds: “We see the [governance committee] as an important part of our stewardship obligations towards our colleagues. Without the involvement of the [governance committee], colleagues would need to take a more active role in their saving options, and our experience shows this is not a particularly common behaviour.
“There is also an implicit understanding from our colleagues that the company will take an active interest in their investments, probably driven by the fact that the majority of current members came from a defined benefits scheme governed by a trustee board.”
Palfrey says there has been no real increase in transfer requests, but he does not rule out a surge when the new flexibilities become better known in the run-up to April.
