UK – The government will legislate against pension fund trustees taking decisions unless they are ‘familiar’ with the issues concerned - as laid out in the Myners report, claims consultancy firm, William M. Mercer.

The warning comes despite Myners himself stressing at the Pensions Management Institute (PMI) Autumn conference yesterday (Oct 3) that the only legislation as a result of his review would be for compulsory statements of non-compliance.

Mercer says this could be a difficult task for the government.
Says Andrew Kirton, UK head of investment consulting practice, “Clearly trustees should be properly equipped to take effective investment decisions, but familiarity is a difficult term to define, and we are not sure how this could be enforced.”

Consultant Watson Wyatt says it also believes the government will legislate to enforce fund manager and trustee intervention in governance issues if it is in the interests of the shareholders and beneficiaries to do so.

The consultant says it is unclear whether legislation towards higher standards for trustees will be limited to investment decisions.

In general, Mercer welcomes the government’s response to the review and its recently announced revised code of investment principles whilst praising Myners’ contribution to the development of the industry, though it does offer some criticism. “Whilst we might argue over some of the detail we believe that, overall, Mr Myners has performed a service for the industry and scheme members,” comments Kirton.

Mercer believes that the manager of manager and consultants business will benefit from the review, as trustees are expected to delegate more and more of their functions, particularly in relation to asset allocation, whilst continuing to carry out corporate governance issues themselves. Such a view was supported by Myners himself at the PMI conference.

Watson Wyatt says it is disappointed to see that the code of principles is targeted mainly at trustees, with very little mention of the role played by employers in governance matters. It is also critical of the fact that the principles “do not adequately distinguish between fundamental investment principles that should be common to all schemes and best practice that might be feasible only for some.”

Elsewhere, Mercer says it is putting together a service to relieve the burden of compliance with ‘Myners’ for smaller funds.