SPC warns UK Treasury over damage to schemes

UK – The UK Society of Pension Consultants has warned that hasty adoption of the Myners Report on institutional investing could lead to the demise of occupational pension schemes, if trustees, under threat of legislation, feel obliged to adopt the principles where there may have been no justification for doing so.

Calling on the Treasury to reflect deeply on Myners’ proposals before finalising any principles on investment decision making – a key component of the Myners recommendations – SPC president Jane Samsworth, comments: “ We welcome the fact that Myners does not recommend further regulation now. Regulation is, however, clearly a threat, should trustees and, where appropriate, consultants and investment managers, not adopt the treasury principles when there would otherwise have been no justification for doing so. This implies greater burdens on trustees and increased costs for sponsoring employers. This might hasten the demise of occupational schemes.”

The SPC also notes that while Myners’ recommendations may be fine for large pension schemes invested in segregated funds, its application seems over zealous for smaller plans invested in managed funds or sponsored by small employers with limited resources.
“ For small schemes some or all of the detail of the principles is inappropriate.
These schemes should be able to confirm their adherence to the principles when they have operated in a manner consistent with them, even if they have not followed them slavishly.”

On fees, the SPC further opined that it did not think it appropriate that transaction charges be included in fund management fees.
The society argues that fund managers already have duty of best execution and that the Financial Services Authority (FSA) should be called in if this is not the case.
“ If the principle remains as drafted, it could in fact lead to poorer execution, as more dealing would be done on a net basis, with wider spreads than on a commission basis,” it warns.

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