Pension consultants slam UK’s property policy

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UK – The Society of Pension Consultants has said the government is in danger of “shooting itself in the foot” over its plans to ban upward-only reviews of property rents.

The comments follow similar remarks from the National Association of Pension Funds that came in response to a consultation paper from the Office of the Deputy Prime Minister. The government says it is seeking to assist affordable housing.

“The SPC believes that prohibiting upward-only rent reviews would considerably reduce the options open to occupational pension fund managers - at the very time when the government wants to see the 'private' pensions sector built up, to take the pressure off the State pension system,” the society said.

"If upward only rent reviews are prohibited, property investment as a diversifying asset class for pension funds will be under threat,” said SPC secretary John Mortimer.

“The abolition of upward only rent reviews would reduce the attractiveness of property as a matching asset for pension funds, since the rental income stream would no longer be appropriate.

"Ministers want to help pension funds grow at the present time, but this kind of disincentive would be tantamount to the government shooting itself in the foot.”

He added: “The proposal certainly goes against the principal aim of the Myners recommendations - to encourage greater investment flexibility in pension funds."

Last month the NAPF issued what it called a “robust” reaction to the government’s proposals. NAPF chief executive Christine Farnish stated: “Property is an important diversifying asset for pension funds. One of its great strengths is the security of the income flow. Removing this security through legislation would undermine the asset class and damage property values. This would be yet another attack on pension fund savers.”

Meanwhile, the Occupational Pensions Regulatory Authority has said it is inviting trustees and pensions professionals to give informal online feedback on the topic of trustee knowledge and understanding.

It has published two online questionnaires which aim to establish what trustees must know and understand to carry out their duties. The move follows the Pensions Bill’s proposal that trustees should have sufficient knowledge and understanding to run their schemes properly, OPRA said.

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