Trustees’ guide to investment strategy supplement – Spring 2003: News & Views

Government needs yet more consultation Much needed pensions simplification is being delayed until next year after the government said that it is carrying out market research on its proposed reforms. A qualitative survey of the green paper proposals on pensions reform, conducted by financial services market research specialist Consensus Research, is due during the summer, with a second quantitative survey due by the end of this year. In March when these surveys were announced, Ruth Kelly, financial secretary to the Treasury, stated that the government was serious about change. “We want this to work, we want it to be balanced and we want it to be thorough. That means we want you to be involved, to be open about where progress has been made, and where more work still needs to be done.” Over ¬£10K up for grabs Trustees could win a Eu15,000 (approximately ¬£10,300) prize for dreaming up a new type of investment mandate for pension funds. The prize is being offered by a group including the ¬£20bn Universities Superannuation Scheme, the consultant Hewitt Bacon & Woodrow and the Ontario Teachers Pension Plan. Entries must describe within 4,000 words the best way to invest Eu30m for a group of major pension funds, emphasising long-term rather than short-term growth and the need for active, responsible investment. Entries must be received by May 30. Hewitt associate Sally Bridgeland says that regardless of who wins, the competition is expected to throw up a lot of new useful ideas for pension funds. Training days 13 May: Pensions knowledge basic course – defined benefit and defined contribution schemes. Hockley Heath, Warwickshire (& 15 May, London). Mercer HR Consulting. Contact Eldorna Mapp on 020 7963 3193 or 14-15 May: Pensions knowledge, advanced course – defined benefit and defined contribution schemes. Manchester (Also 25-26 June, Chesham, Buckinghamshire). Mercer HR Consulting. Contact Eldorna Mapp on 020 7963 3193 or email 5 & 22 May: Investment and funding for absolute beginners. Glasgow. Jardine Lloyd Thompson. Contact Mairi Murray on 0141 240 2907 6 June: Practical trusteeship training. Crowne Plaza, Manchester. Buck Consultants. Contact Vicky Moyes on 020 7448 7043 19 June: Trustee training. London. Towers Perrin. Contact Hannah Bassally 020 7170 3258 or email 2 September: Introductory seminar for trustees in defined contribution schemes. Amersham. Barnett Waddingham. Contact Mark Da Silva on 01494 788100 or email 11 September: Introductory seminar for trustees in defined benefits schemes. Cheltenham. Barnett Waddingham. Contact Mark Da Silva on 01494 788100 or email • For more training dates and events visit the Events & training section. Six investment tips for trustees 1 Don’t panic. 2 Don’t try to call the market – challenge any decision which hinges on a single view about whether a market will recover or fall in the future. Everyone can be wrong. 3 Do use the change in the financial circumstances of your scheme as an opportunity to review your investment strategy and an acceptable level of risk. Decide where you’d like to be longer term and plan a route to get there. 4 Don’t leave it for three years before you review your funding position and investment plan. By monitoring it more frequently you won’t miss opportunities to lock into longer-term increases. 5 Do remember the limitations of what you as trustees can do with investment strategy alone. If the pension scheme does not suit the sponsoring employer’s business strategy, a more fundamental review is required. 6 Do focus on the risk of not meeting your liabilities rather than the risk of a fund manager not beating an index. Bond and equity indices may not be the best measures for managing liability-related risk, so consider alternative approaches. Source: Hewitt Bacon & Woodrow associate Sally Bridgeland. New pensions research • Inland Revenue figures released in March show that UK companies took contribution holidays from their pension funds worth ¬£28bn between 1988 and 2001, while employees took contribution holidays worth ¬£1.1bn. The figures only apply to pension funds with 12 or more members. • 61% of employers increased their pension scheme contribution rate in the year to March 2003, according to a survey by the consultant Jardine Lloyd Thompson (JLT). 23% of employees have been asked to increase their contributions over the same period. In a separate survey by JLT, 82% of respondents say the industry has problems communicating information to members. • 44% of the largest 350 UK pension schemes now invest in private equity according to research by JPMorgan Fleming Asset Management. Eight out of 10 of those surveyed by the fund manager said that returns on private equity had exceeded their expectations. • Support remains high for a voluntary approach to the Myners code with over half (61%) of the UK’s largest pension funds in favour according to the consultant Watson Wyatt. New publications The Occupational Pensions Regulatory Authority (Opra) has launched a series of guides for pension scheme trustees. The leaflets are designed to provide information ‘at a glance’ on topics such as trustee duties, sources of information and how to appoint scheme actuaries. • For more information or to obtain copies of the guides contact Opra’s helpdesk on 01273 627600 or email London Regional Transport Pension Fund has joined the growing number of funds that have launched their own websites. • contains information about the fund’s benefits and the range of its investments.