EUROPE - Pension funds should use the current financial pressures to renegotiate the terms, conditions and pricing with every service provider and contract they engage in, according to the UK's Invensys pension plan. This would help them to improve their financial positions and raise the level of service they should be able to expect.
Robin Claessens, chief executive of Invensys Pension Plan, said the attitude of companies and officials in the pensions market prior to the economic downturn led pensions executives to believe they could not press for better terms and service pricing.
He made his comments ahead of last night's IPE Awards in Dublin, for which he was nominated for the Outstanding Industry Contributions Award.
He believes the sheer size and importance of the pensions industry, as well as the significant losses suffered, means asset managers, consultants and investor services firms have had to rethink their business potential.
"Previously, the banks should have had all of the power because they had the tools to manage the risk," said Claessens. "The asset managers took advantage of UK pension funds. Lawyers and consultants have their share of responsibility. And the feeling was you couldn't negotiate with the asset managers.
He continued: "All of the terms and conditions had in the past been designed to meet all of the asset managers' requirements but not the scheme's, which is really unbelievable. But we have changed all that at Invensys because we placed everything as one segregated business and said ‘these are going to be our terms, and if you don't like them we'll replace you'. They agreed with all of the changes."
Key changes were also made after Invensys spoke to an investment bank and used its investment models to assess the pension fund's position and strategy. Approximately 95% of its assets are in custody with one institution, and additional information flows mean officials know exactly how much risk they are running across its asset managers and asset classes.
However, further work is also needed across the industry, claims Claessens, to raise governance standards and knowledge of how to run a pension fund.
He suggests improved trustee knowledge and a possible shift in the recruitment of pensions executives could boost professionalism further.
"I think a weakness in pension funds is that a lot of people working for these funds don't have the right background," said Claessens. "Certain individuals are very good but the weakness of investment consultants is they don't have practical experience - no experience of trading, selling, no experience of risk, because they don't take the actual risk. Things have to change and we have to bring the pension funds into the 21st century. The trustees and the regulator have to put a lot of emphasis on choosing the right trustees."