Measuring up
It's not just banking regulation that needs tightening
It’s not just banking regulation that needs tightening but private pension schemes are badly in need of better governance and stronger oversight.
The OECD is calling for both in new guidance issued today, rolling out a blueprint with recommendations on governance, funding, investment and the rights of pension plan members.
Asset managers, all change
Musical chairs: Survey shows plans to both fire and hire asset managers
One way or another asset managers are in for a bumpy ride this year as many are likely to be replaced.
At least that’s the scenario according to Mellon Transition Management, part of BNY Mellon Asset Management, which says a record number of global pension funds and endowments are planning to change asset managers as they try to reduce risk.
New thinking needed for personal accounts
Blue-sky thinking needed
The designers of the UK’s new personal accounts, the national pension scheme to be rolled out from 2012, have a great opportunity to shape the way pensions are delivered in future. They could challenge the pensions industry to come up with new ideas and indulge in blue sky thinking.
Or they could stick with standard industry products and hope they work. That seems to be the preferred approach of the respondents to the Personal Accounts Delivery Authority’s consultation on how to provide retirement income.
Debating the pensions crisis
Investment consultants continue to urge savers to take the risk of stock market investment when investing for their retirement.
Mick Calvert of Watson Wyatt is quoted in an interactive graphic on FT.com dealing with the pension crisis as saying:
“Strategically and looking long term, now would seem to be the time to be putting more rather than less into equity markets if its’ affordable.”
A more considered view comes from Ros Altmann, an independent pensions expert. She says: “There is no financial or economic rule that says just because you invest in the stock market you personally are going to do better than risk-free assets.”
People who want security and cannot afford to take risks would be driven to index linked gilts, or some sort of protected equity investment, she says.
Relying on the equity bet has let down many people close to retirement. Prices are lower now, but there is no expectation market volatility is a thing of the past. So what makes it safe to go back to relying on equities, and how long is the long term?
CBI complaints won’t wash
UK employers want to play a game of heads I win, tails you lose, with the members of their pension schemes. They are keen, too, to draw a veil over how much they owe the schemes: perhaps they think it is not good for their share prices to be open and transparent about this.
The FT reports today on a plan put forward by the CBI, the UK employers’ body, for sweeping changes to pensions regulations. Among other things, it wants longer to make good a deficit than the 10 years currently allowed, and to move away from marking liabilities to market, which the CBI says can misrepresent a scheme’s position.
Further reading
The M&G bond team are still positive about corporate paper, although they are cautious about taking some of the extraordinarily high yields at face value.
Pimco continues its ongoing series of thoughtful articles about defined contribution retirement savings plans with a conversation with Barbara Kontje, director of the retirement plan investments at American Express Company.
Investec Asset Management’s strategist Max King has joined the swelling tide of voices declaring the beginning of a new bull market.
Higher rate tax relief should go
The UK goes head to head with high earners on tax relief
Messing with tax relief on pensions for high earners has not gone down well with some of the UK’s big savings organisations.
The FT today reports that the bosses at Legal & General and Friends Provident both claim that cutting tax relief might discourage saving. Alistair Darling announced in last month’s Budget that people earning more than £150,000 a year will be restricted to basic rate tax relief on contributions.
Guaranteed products – most advisers recommend them
Are guaranteed products gaining IFAs' seal of approval?
Although research for the UK’s Department for Work and Pensions says guaranteed products cost too much to be a rational investment for pension savers, independent financial advisers seem to have a different take on things.
More than 90 per cent of IFAs recommend structured products to their clients, according to a survey conducted by Structured Products magazine. Even allowing for the likely bias as IFAs try to be polite to the questioner, that’s a swingeing majority in favour of a product with a distinctly opaque cost structure.
A large part of the cost to investors of guaranteed equity products (the main form mentioned in the survey) is dividends, which the product provider gets to hold onto. The DWP’s research estimates this cost amounts to between 15 and 20 per cent of the amount invested – are IFAs telling their customers that, or are they even aware of it?
FTfm is no longer updated but it remains open as an archive.
FTfm's specialist writing team offer their insights into the global fund management industry.
Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.
Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.
Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.
Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.
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