UK – Disclosure and governance are critical ingredients in serving UK auto-enrolment pension savers well, according to the Investment Management Association (IMA).

The asset management trade body said it submitted written evidence to the Work and Pensions Select Committee saying good scheme governance was vital if the new system of automatic enrolment of UK workers in occupational pension schemes was to succeed.

Jonathan Lipkin, associate director of pensions and research, said: "Automatic enrolment creates a huge opportunity to change positively the long-term savings culture in the UK."

But in ensuring that pension savers are well served, the industry has a big collective responsibility, he said.

"In this respect, both disclosure and governance are critical ingredients," he added.

Specific IMA proposals include a clear and consistent approach to charging and disclosure, as well as an all-inclusive annual pension statement for everyone.

It said: "Developing a statement that shows pension pots in their entirety, including both state and private provision, will help to give savers a realistic impression of how much they need to contribute to their pensions to achieve their desired outcome."

The IMA said auto-enrolment would lead to an unprecedented rise in the number of investors with little investment experience or knowledge.

Because of this, it was imperative that those investors were protected by robust governance structures, supported when important decisions needed to be made and given straightforward information, the association said.
Lipkin said good governance meant making sure decision-making was effective, transparent, accountable and focused on member outcomes.

The IMA would like to see the defined contribution governance framework used and developed, he said.

This framework was laid out by the Investment Governance Group in 2010.

In other UK news, Aon Hewitt has found that most defined benefit pension schemes in the UK are sticking to their strategies even though funding remains below the level set for funding triggers, and in some cases is even continuing to fall.

In a survey of around 80 schemes with funding level triggers in place, Aon Hewitt said more than two-thirds had opted not to change their strategy in response to falling funding positions, hoping instead to ride out the low-yield environment.

About one in five schemes had re-risked their asset strategies, while around one in six had reviewed their trigger points, the study revealed.

Paul McGlone, partner at the firm, said: "To remain realistic, flight plans and triggers need to be reassessed and refined from time to time, especially when conditions change substantially."

But despite the ongoing low-yield environment, there is undoubtedly an element of 'Keep Calm and Carry On' in the industry, he said.

"Trustees are anticipating that if no action is taken, then, in time, yields will rise and the situation will become more manageable," McGlone said.

The main thing schemes with triggers were doing was actively not buying matching assets because their triggers were telling them that they were unaffordable at current prices.

He said many trustees and employers had clearly taken the view that taking no action was a rational response and that their triggers would tell them when matching assets were back at a level they could reasonably afford.

"However," he added, "at the same time, there is a danger that prices will take a long time to come back down, so schemes could find themselves in a position of inactivity for some time."

Schemes were also shown to be considering taking the further step of selling matching assets to buy additional return-seeking assets to re-risk, the consultancy said.

Nearly 50% of all schemes with de-risking triggers recognised the merits of re-risking and would be prepared to take that step if required, according to the survey, with almost one in five having taken that step in the past 12 months.