UK roundup: Lord Hutton, Hymans Roberston, BDO Investment Management, YouGov, SHILLING
UK - Lord Hutton is clearly facing a "difficult balancing act" when he unveils his report on public service pensions later this week, according to John Wright, head of public sector pensions at Hymans Roberston.
Commenting on responses from trade unions on the proposed contents of the much-anticipated report, Wright said: "If the expected outcomes widely reported (career average benefits, later retirement, protecting accrued rights) materialise, he will have done a decent job balancing the needs of diverse stakeholders - including members, unions, administrators and tax-payers - in difficult circumstances.
"We are supportive of the measures he is likely to propose. However, the divide between the private and public sectors will persist - albeit to a lesser extent - until more is done to improve the level of provision in the private sector. Unfortunately, reformed public sector pensions as a benchmark may remain out of reach of the private sector."
Wright said Lord Hutton's likely proposals were a "necessary step" along the way to a more sustainable system.
He added: "By keeping the changes relatively simple, and by not pushing the boat out for a more radical overhaul that would improve the chances of sustainability, the reforms should be easier to implement and be more widely acceptable in the context of fairness, increasing life expectancy and the economic reality we're facing."
In other news, BDO Investment Management has argued that HM Treasury's pension proposals could "radically accelerate" the destruction of the traditional public sector.
Last week, HM Treasury issued a consultation document about the 'fair deal' pensions policy, which applies when public sector staff transfer to a private sector employer as part of an outsourcing contract. The Treasury is looking into a number of options, including the scrapping of the current policy.
But John Broome Saunders, actuarial director at BDO Investment Management, said: "If 'fair deal' is scrapped, private sector employers will be able to offer staff much less generous defined contribution pension arrangements and cut staff costs by perhaps around 15%. Moreover, they will no longer have to worry about the risks associated with final salary pension promises.
"At a stroke, they will be able to deliver outsourcing contracts more cheaply - and assuming they reduce the price of those contracts accordingly, it will suddenly become financially very attractive for local authorities and other public sector organisations to outsource more services to the private sector. Clearly, the unions will not like this."
Lastly, a YouGov survey carried out on behalf of SHILLING Communication has found that seven of 10 workers do not monitor or make changes to their pension fund on a regular basis.
Even more surprising, almost half (47%) of respondents with defined contribution (DC) pension schemes assumed matters were being looked after on their behalf.
Katie Frost, director at SHILLING, said: "There seems to be an assumption among workers that their pensions are being looked after for them, which might have been the case with defined benefit pension schemes, but certainly isn't the case with defined contribution, where members bear the risk.
"In many instances, member communications simply aren't working, as the DC message clearly still isn't getting through. Trustees, as part of their commitment to good governance, mustn't underestimate the importance of investing in effective communications that are appropriate to their scheme's members."