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Pension experts tout need for longer-term benchmarks

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  • Pension experts tout need for longer-term benchmarks

GLOBAL - A joint meeting of the OECD and IOPS Global Forum on Private Pensions has been warned a "meaningful" long-term performance measure for pension funds must be found which assess pension funds' ability to meet income replacement.

The preliminary findings from a review of pension funds around the world suggested a different benchmark measure is needed as private pension plans are typically required to evaluate their performance against other investments with shorter-term performance interests, even though it does not suit their long-term objectives.

Few details have been released at this stage - as a full report on the project will be unveiled in December - but the study has found "performance measures should focus on the long term" as the volatility and unpredictability of the existing regime is not suited to the raising of retirement income.

The group has recommended solutions to policy makers and regulators which it hopes will encourage investment strategies with a longer-term perspective.

Ideas  so far presented include "carefully designed ‘life cycle' default portfolios which could be used as benchmarks "with supervisors using a traffic light system to highlight how closely pension funds adhere to such standards".

Speaking at the meeting, Pablo Antolin, senior economist at the OECD's private pensions unit, said "Market mechanisms currently focus too much on the short-term returns. The key message from this project is that we need to find a better balance between the role of the market and the role of government in enhancing the performance of pension funds and reducing the risk of individuals' retirement with insufficient income due to the misallocation of their pension assets".

The project was originally launched in 2006 by the World Bank and the OECD, accompanied by Spanish bank BBVA, Dutch bank ING and VB, the Dutch pension fund representative body.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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