UK - Falkirk Council has appointed an active global equity manager, while law firm Nabarro has appointed an independent trustee for its pension scheme.

Meanwhile the Social Market Foundation (SMF) think tank has warned against pension reforms that are "too flexible", and calculations by Towers Watson suggest UK public sector pension liabilities have reached £1.2trn (€1.3trn).

Falkirk Council has awarded a £120m active global equity mandate to Aberdeen Asset managers.

The mandate, equivalent to around 15% of the £784m pension scheme, was tendered in August 2009 with a target outperformance of 2-3% a year benchmarked against either the FTSE All-World or the MSCI All Countries World index. (See earlier IPE article: Kensington, Enfield and Falkirk seek managers)

But the council noted the five-year contract would be part of its existing global equity manager structure - which has a neutral to mild growth bias - with the aim of achieving a "broadly style neutral profile overall".

Pitmans Trustees Ltd has been appointed as an independent trustee director of the Nabarro Pension Scheme.

The law firm said the appointment reflected PTL's "focus on the big picture of management pension scheme risk".

Nicole Paradise, from Nabarro, added: "The demands on lay trustees are growing. Governance is a big issue for all schemes at the moment and we recognise that our scheme could benefit from the appointment of an independent trustee director to assist the board."

There is no evidence that denying people early access to pension saving in emergency situations is limiting retirement saving, according to research from the Social Market Foundation (SMF).

In a report on 'Early Access to Pension Saving' the think-tank instead warned politicians "not to meddle with the current pension rules by making it easier to get early access to monies saved in pension funds". It claimed this could open up an "administrative can of worms" and trigger large public and private sector costs if people spend their savings and are forced to rely on the state in retirement.

James Lloyd, author of the report, said: "UK pension policy is drifting towards granting early access to pension savings.  However, there is no evidence that people are failing to save in pensions because they are being put off by the current rules."

The SMF suggested future reforms should leave the existing pension regime alone and instead focus on improving the use of flexible savings vehicles such as ISAs to cater for financial emergencies.

It said one of the reasons for allowing early access is to help those in financial difficulties, yet these are the people least likely to have a pension fund. Lloyd said: "With people living longer, healthier lives, pensions have to provide an income for some 25 years plus and so a large amount has to be built up - pensions cannot just be dipped into."

Towers Watson has warned that unfunded pension liabilities in the public sector now amount to almost £1.2trn (€1.3trn), or around 80% of GDP. 

Official figures from the government place the public sector pension liability at £770bn in March 2008, calculated in a similar way to company pension deficits in accounts. But the consultancy has claimed by applying the same methodology in March 2010 the liability would increase to £993bn.

However when calculating the liabilities in relation to government borrowing costs rather than company borrowing costs, Towers Watson revealed the figure would rise to £1.176trn, equivalent to just over 80% of GDP or £47,000 per household. This is in contrast to forecasts by HM Treasury in December 2009 of a Public Sector Net Debt of £986bn in 2010-11.

John Ball, head of defined benefit pension consulting at Towers Watson, said: "Members of public sector pension schemes have a bigger claim on future taxpayers than the investors holding government bonds do." As the consultancy said figures from the Debt Management Office (DMO) showed total gilt issuance on 19 March was valued at £913bn.

"The government has always said public sector pension liabilities were well below £1trn, but that is no longer the case even on its preferred way of working out the numbers. Like companies preparing their accounts at the start of 2010, the government will sooner or later have to record a big increase in pension liabilities because interest rates have changed," warned Ball.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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