By Huw Jones
LONDON (Reuters) – Some pension scheme trustees are unaware of many required duties and need better skills to implement new government objectives of investing in unlisted companies to boost growth and returns for savers, Britain’s finance ministry said on Tuesday.
Finance minister Jeremy Hunt on Monday set out plans to increase pension fund investment in unlisted companies and mandatory consolidation of poorly performing schemes.
“It is concerning that some trustees, especially at the smaller end of the market, appear to be unaware of many of their duties and legal obligations,” the ministry said in a paper out to public consultation until September.
Many trustees work voluntarily while retired, on in a full time job, and can struggle to stay on top of things, the paper said.
Better skills will also be needed to implement the planned Value for Money framework, with its emphasis on performance of schemes, it said.
“Evidence from Australia’s ‘constructively tough’ approach to supervision of trustees shows the importance of focusing on good governance to improve results for members,” the paper said.
Regulators questioned the skills of trustees who signed off on using liability-driven investment (LDI), which struggled last September to come up with enough collateral.
The paper requests views on the current state of trustee capability, the role of investment consultants in advising them, and whether trustees have enough time to fulfil their duties.
The ministry has already been asked by the Financial Conduct Authority (FCA) to regulate consultants.
“Following the LDI-related market turbulence last year, this proposal has been echoed by others,” the paper said, adding that the government was working through its next steps on investment consultant regulation, looking in particular at advice given on investing in unlisted equities.
FCA CEO Nikhil Rathi has said that a smaller number of defined benefit schemes using professional trustees might be better at delivering long-term investment.
(Reporting by Huw Jones; Editing by Mark Potter)
