MFR abolition will have no impact says APPB

UK – Abolition of the minimum funding requirement (MFR) will not halt the trend for pension funds to invest in a risk averse manner, Peter Tompkins, chairman of the Actuarial Profession’s Pension Board (APPB) has told the annual National Association of Pension Funds (NAPF) conference in Birmingham, which ends today (May 18).

In a speech raising concerns about the government’s intended abolition of MFR for pension funds, as recommended in the recent Myners Report on institutional investment,
Tompkins declared: “Abolishing the MFR will not reverse the gradual switch towards less risky investment behaviour because this is driven more by schemes becoming more mature, i.e. having more pensioners rather than by MFR.
“ In other words the trend towards bond investment in defined benefit pension schemes is unlikely to be halted by the Myners proposals. “

Tomkins also honed his criticism on the Myners Report recommendations for a ‘scheme specific funding standard’, describing the approach as “poorly-defined”.
He added that member protection was paid no more than lip service in the government’s proposals.

While welcoming the government’s recognition of the importance of scheme actuaries in pension scheme funding, the APPB chairman warned that the role of the actuary needed clarifying.
“ The government’s solution is to give the scheme’s actuary a ‘statutory duty of care’, though nobody has defined what this means. If the scheme actuary is responsible for any deficit in their pension benefits then this will inevitably mean recommending funding on a strong and expensive basis.”