Less than a third of pension scheme representatives present at a recent webinar supported the government’s plan for pension funds to invest in growth assets, while others stress that any higher risk investments must deliver an upside to members. 

 

A poll of 200 pension scheme representatives at an event by XPS Pensions Group on Tuesday showed just 30% were broadly supportive of the chancellor’s plans to encourage more growth investment by schemes. 

 

To convince pension fund trustees, the government is aiming to educate trustees – a consultation was launched to this end – but only 4% believe more training would have the most impact.  

 

Many believe it is not lack of training but current regulations that have led to low-risk investments, as more than two-fifths (43%) said a fundamental change to the flexibility of funding and investment would be the most important change needed to allow more investment by defined benefit schemes in UK growth assets. 

  

XPS partner Wayne Segers said any fundamental change to UK pension policy will require scrutiny and consultation to ensure that member protection is upheld, with DB schemes currently having high funding levels and therefore better security. 

 

Several policy changes could help improve efficiencies in DB pensions, including around rules on surplus to improve employee savings and investment in businesses, Segers agreed. 

 

However, he added: “Whilst we are very supportive of a rethink in policy that can help improve outcomes for members and lead to more diversity in pension investment, we believe such fundamental change should not be rushed over the summer.” 

 

A consultation published on Tuesday on getting DB schemes to invest in growth assets is due to end on 5 September, potentially with a view to announcing policy changes in the Autumn Statement. 

 

 

The Work and Pensions Committee has an ongoing inquiry into DB pensions, which is only expected to report next year. 

 

   

The Association of Consulting Actuaries stresses the need for voluntary investment. 

 

ACA chair Steven Taylor said: “It’s right to focus on ensuring the best possible outcomes for pensions savers.  We have long supported organic ways to evolve UK pensions policy that align with this goal and that can harness existing governance structures that are a cornerstone of savers’ hard-won trust in their pension schemes.” 

 

However, the association said it does not support proposals which would compulsorily require any schemes to hold particular asset classes. 

 

Some are cautiously supportive of readjusting DB investment focus. 

 

Douglas Hogg, a client director at trustee firm Zedra Governance, said there could be opportunities in productive finance. 

 

Even so, he stressed that members need to remain protected: “Given the size of the corporate DB asset pool, creating joint solutions to enable DB pension schemes to invest to meet the productive finance agenda could deliver significant benefits to the country as a whole, but any new solutions and approaches must ensure they are structured in such a way as to ensure member outcomes are protected – and ideally improved.” 

  

The government’s proposals for DB investment offers opportunities but also come with major risks, agreed John Harvey, partner at consultancy Aon, including a proposal to encourage DB schemes to accumulate surplus. 

 

“Such a change in approach offers some exciting possibilities for using higher investment returns to deliver material economic benefits to UK companies who sponsor DB schemes. However, we would be concerned about any structure that introduces more risk to members with uncertain outcomes,” he said. 

 

“It is therefore important that members see an upside and an appropriate share from any additional economic value delivered through a more growth-oriented investment approach – and particularly during a period when cost of living increases can significantly erode pension purchasing power for many,” Harvey added. 

 

     

What do you think – should DB schemes invest in productive finance?

Steven Taylor

Arron Slocombe

Margaret Snowdon

Kim Nash