UK - The 2001 Myners Report on pension funds is to be reviewed by the National Association of Pensions Funds and the Treasury next year.

David Morgan, chief executive at Coal Pension Trustees Services, said the review will be based on a detailed survey of the pension funds' position with regards to the original report by Paul Myners and look at ideas on how to move forward.

The review will also focus on the application of good and best practice in 2007, he said when speaking at the organisation's autumn conference in London.

In his original report, Myners tried to create a culture of governance by using the techniques of businesses boards and recommended activity based on 10 principles. A previous attempt at a review was abandoned by the government in 2004.

Morgan said "there had been a paradigm shift in requirements of trustee boards due to the change of covenant and Myners". He added that the option trustees were given to raise their collective level of expertise by recruiting skilled trustees and train existing ones, a requirement in the original Myners report, had become even more important today.

The Pension Act 2004 and guidance by other pension regulations have redefined the relationship between employer and trustees in a defined benefit scheme, with the result that both parties have now moved onto the same level.

Eddie Thomas, head of pension trustee practice at Law Debenture, said the ultimate test of a covenant, or mutual agreement between  employer and trustee, was "the cash actually paid". He added that the employer's financial ability counted for nothing unless it was met by a willingness to provide tangible security for members' pension rights.

Chief executive of the Electricity Supply Pension Scheme, Richard Barlow explained the use of a recovery plan, if a defined benefits scheme was not fully funded. He said the scheme-appropriate recovery plan could eliminate the shortfall or deficit by a set date and by means of additional contributions as quickly as the employer can afford.

What is possible and reasonable in the plan also depended on the covenant and contingent security.  The new investment strategy Myners was emphasising in his report was scheme specific and open-minded with a clear objective and a focus on asset allocation, appropriate benchmarks and costs.

Barlow said history had proven that conventional investments - such as liability driven investments (LDI), bonds and gilts, swaps, derivates, hedge funds, private equity, infrastructure, commodities and cash - did well over the lifespan of pension funds.

Pension funds, spurred by regulation such as accounting standard rule FRS17 and the pension regulator, were now moving towards LDIs so they could better match out liabilities, he said.

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