UK – Consultants to pension funds appear to have emerged unscathed from a new government-sponsored report into the UK’s pension crisis – with observers welcoming its focus on the future.

The Pension Commission’s 316-page initial report makes no reference to investment consultants or actuaries and is largely keen to avoid apportioning blame for the current state of pensions in the UK.

“The problems of the British pension system today reflect the cumulative impact of short-term decisions, of commitments made, and of policies rejected, sometimes under the pressure of electoral cycles, by governments over several decades,” the report states.

“I don’t think it’s his remit to be critical,” said Joanna Livingstone, principal at actuarial consulting firm Punter Southall. “It’s his remit to look forward.”

That view was backed by John Shuttleworth of PricewaterhouseCoopers. “There’s not a lot to be gained by apportioning blame. We’ve got to move forward.”

The report says the government and employers were both “over optimistic” about the sustainability of long-term pension returns – with the government increasing tax on pension fund investment returns and companies taking contribution holidays.

“The most useful response to this report by politicians of both government and opposition and by other interested parties would not entail immediate conclusions,” the report says.

“There are no easy answers to the problems we face. It would therefore be unfortunate if initial debate on this report, particularly in a pre-election period, led to any options being ruled out.

“We are not making specific recommendations, but we know already that it is impossible to deal with the challenges facing us without making difficult choices.

“We need to develop an approach which can command consensus across parties, and which can be sustained across parliaments and governments.”

One of the key elements, the Commission says, is trust – or the lack of it. “The retail financial services industry has lost the trust of customers as a result of a sequence of mis-selling scandals and problems (such as pension mis-selling, endowment mis-selling, Equitable Life, split capital trusts).

“And the government is not trusted either, probably because of the frequency with which governments over the years have changed state pension promises.”

The three-person Commission, headed by Adair Turner, the former head of employers group the Confederation for British Industry, says employers are still trusted on pensions.

“Only employers still show up in surveys as trusted on pension matters at least by those who are actually members of occupational pension schemes,” the report states.

“While this may seem surprising in the light of the major, highly publicised, and tragic cases of pension fund insolvency, it may reflect understanding of the reality that the vast majority of employer Defined Benefit (DB) promises have been met.”

The Commission added: “Trust in DB schemes may also grow in future to reflect the insurance provided by the Pension Protection Fund.”

The group is now launching the consultation phase its work and would like to receive written submissions by the end of January 2005. It will produce specific policy proposals in about a year.