Should the PPF take on schemes that can't consolidate elsewhere?
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The Pension Protection Fund should explore if it can act as a consolidator or provider of aggregated services for schemes which are not attractive to commercial consolidators, former chief executive of the Pensions Regulator Lesley Titcomb has recommended in a review of the public body.
The PPF’s skills and capabilities should be shared more widely, Titcomb said in the Departmental Review of the Pension Protection Fund, suggesting that the lifeboat and the Department for Work and Pensions explore if it could offer consolidation to schemes which would benefit from this, or if it could manage investments for government.
‘Outstanding’ investment performance
The £38bn fund’s recent investment performance against its benchmarks has been “outstanding”, she said, arguing that it should therefore take a higher public profile and share more information on its approach to investment management, particularly about responsible investing.
“It should also use its position as a public body to work with others to encourage the development of more UK-focused well-structured alternative investment opportunities,” she added.
Given the importance of the investment function in the fund, which manages half of assets in-house, she also said it should consider becoming authorised by the Financial Conduct Authority.
PPF should offer levy calculator and scrap admin levy
Stakeholder relations could benefit from changes too, as the fund’s profile in the industry “is not as high as it was, say, five to ten years ago” based on stakeholder feedback, the review said.
As well as raising its public profile, to strengthen stakeholder relations the PPF should abolish the administration levy and provide a levy calculator for schemes and their employers via its website, “so that they can work out what their risk-based levy charge will be in pounds and pence”, Titcomb recommended. “If it is not feasible to provide this, then it should explain clearly why this is the case."
The fund recently dialled down its annual levy to an aggregate £200m for 2023-24, from £390m in 2022-23 and £620m in 2020-21.
What if there is a surplus at the end?
Coming up with a plan for any possible future surplus in the PPF should be on the agenda, Titcomb also noted.
The fact the fund does not appear to have one yet is perhaps symptomatic of its relation with the DWP. The review suggested this is not strategic enough, focussing mainly on “fairly low-level issues” or specific policy matters.
She said the fund’s new chair, Kate Jones, should have a chance to build relationships with key senior people in the ministry, and that the chair and chief executive should meet the pensions minister together twice a year “with a focus on the strategic challenges, risks and opportunities facing the PPF”.
The executive team in general should also be able to work more closely with DWP counterparts, she advised.
