Hewitt risks raising expectations too high
Most days I can rely on a communication from some investment consultant or other landing in my inbox bemoaning something about pensions.
Today it is Hewitt Associates, which quotes some nice round figures about the danger of 15,000 people in the UK losing at least 20 per cent of their pension benefits if trustees of defined benefit schemes do not “take control of investment strategy”. It says £150m of pension benefits are at risk over the next two years.
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?