UK DB pension schemes should be free to invest more in growth assets according to their risk appetites, but regulation needs to evolve to allow them to do so, the PLSA investment conference in Edinburgh was told last week.
John Hamilton, trustee and group pensions director at Stagecoach Group Pension Scheme, said DB schemes are not investing enough in growth assets. Of the total £1.4trn (€1.6trn) held by DB schemes, just £160bn-170bn is in equities.
The UK has “the most fantastic” pensions infrastructure, according to Hamilton, in terms of the regulator, the Pension Protection Fund, and the local government pension sector, with many ideas to take advantage of.
“But we don’t.” Hamilton said. “We invest virtually nothing in our own ideas.”
Fixing the situation will take a change in mindset and regulation. Current regulation was designed in a “period of economic surplus” where growth was 3% per annum and the Zeitgeist was “how do we stop these bad employers and how do we protect these pension schemes from employers”.
Hamilton added: “The whole mindset of this country and our schemes needs to go towards growth, and so the regulatory regime needs to support our mindset”.
He also pointed out the contradiction in having a minister saying “growth, growth, growth”, and actuaries saying “de-risk, de-risk, de-risk”.
“We need to change so [the] actuarial perspective, regulation, all of us need to just go forward for growth.”
However, Hamilton is not a “fan of mandation” and said trustees should be able to set investment strategies according to their own risk appetites.
Richard Williams, corporate affairs director at Universities Superannuation Scheme (USS) agreed, saying fiduciary duty “comes first”.
And while there’s a debate around whether this fiduciary duty should include specific investment, he said: “Once the government has added one investment obligation it would be easier and tempting to add more,” adding that this would be “unhelpful”.
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Pamela is IPE's UK correspondent.
Before joining IPE in May 2023, she spent five years writing about the insurance industry.
During her career so far she won awards for Most Promising Newcomer in 2020 and Best Investigative Article in 2022 from the British Insurance Brokers Association, and was also highly commended at the WTW Media Awards for Insurance Features Journalist of The Year.View full Profile
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