11 July 2023
Commenting on the UK Chancellor of the Exchequer’s Mansion House Speech in the City of London last night, Debbie Webb, Pensions Board Chair at the Institute and Faculty of Actuaries, said:
“It is good to see the initiatives set out in the speech seeking to increase pension scheme investment to support more growth in the UK economy, particularly where it is also likely to improve long term outcomes for savers.
“However, it is important to recognise that pension funds already own and contribute to UK assets in a range of ways such as Government bonds, equities, and infrastructure. The assets most appropriate for investment will always depend on the pension fund and its structure whether defined benefit (DB) or defined contribution (DC), open or closed. Any investment decisions need to be taken in this context.
“If DC schemes invest in appropriate growth assets, there is an opportunity for improved outcomes for savers. Similarly, we are strong supporters of Collective Defined Contribution (CDC) schemes and believe they have the ability to deliver good long-term outcomes for members while also facilitating higher allocations to growth assets for longer than is usually possible in other schemes. We look forward to changes to CDC legislation to allow a wider range of schemes.
“We support the initiatives to put an appropriate process for consolidation in place, that would provide options for some DB schemes However, there are complexities associated with DB consolidation which would make any compulsion in this regard highly undesirable.
“This package of measures must be set against the context that the primary purpose of a pension fund is to provide a retirement income for its members. The fiduciary duty that a pension fund holds to its scheme members means that investment in new assets should only take place where longevity is weighed and there is an appropriate risk/return ratio. It is important that these measures are carefully calibrated to match both growth requirements and policyholder protection concerns, and we would not be supportive of any initiatives that sought to compulsorily require schemes to invest in particular asset classes, or to consolidate.”
~ENDS~
Sonia Sequeira, Communications Lead, IFoA
Tel: 07525 592 198
Email: sonia.sequeira@actuaries.org.uk
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