UK - The president of the Faculty of Actuaries has called for the National Association of Pension Funds to make a “Lord Penrose-like enquiry” into occupational pensions.
“In other words: should we wait until there is a scandal before we have a good enquiry about how we are doing?” Tom Ross, who was chairman of the NAPF in the mid-90s, told IPE. Penrose led the investigation into life insurer Equitable Life.
Ross concluded the NAPF’s annual conference by addressing delegates with a speech which gave “paternal advice” to employers, advisors, the government, and the NAPF. The NAPF, he urged, should be more clear about its role.
He said it was not clear whether the association represented “employers or trustees, big pension funds or little funds”. But he also praised the association for the progress made in recent years.
Employers should think carefully before ditching defined benefit schemes while advisors should not be afraid of giving “bad news”. But he said they should make people aware of the risks attached to investments and inadequate funding.
Employers should not “throw the baby out with the bath water” and close DB schemes to offer “much less valuable schemes”.
He said employers should ask themselves whether they see pensions as an investment or a cost.
“If you regard it as an investment in your people, then you should think very carefully before you abandon the concept of a defined benefit pension scheme,” he told IPE.
Final salary schemes, he added, had given other kinds of DB schemes “a bad name” because they tend to benefit highly paid workers.
Employers should put money aside to “properly” finance pension schemes but they should also have more control over investments and other aspects of scheme administration.
Advisors, on the other hand, should ask themselves what would Lord Penrose, chairman of the Equitable enquiry, find out if he looked at financing and the governance of final salary pension schemes.
“Would it be satisfactory in this day and age that pension promises are not being kept? That we have a Pension Protection Fund that is only going to protect us for a proportion for no understandable reasons,” he said.
“Advisors are to recognise that we haven’t in the past, and I am not just talking of actuaries, haven’t recognised that ultimately the people affected by their advice are the beneficiaries, the ordinary people on the streets.”
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