Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.
The leader of the UK's largest private sector pension scheme has urged the government to refrain from excessive interference in how pension funds are managed.
Speaking last week, before the Treasury set out plans for a major reform of the sector, Carol Young, chief executive of the £73bn university pension scheme, said she had no problem with new disclosure requirements on schemes to report the size of their investments in the kingdom. United. .
But she told the Financial Times she would have “reason to be concerned” if ministers went a step further and directed trustees on where the money should be allocated.
“There is no doubt that the primary purpose of [pensions] “It is in the best financial interests of the members,” Young said. “Trustees need to exercise their fiduciary duties, and these are heavy responsibilities on their shoulders. They need the rights that go with that, and one of those rights is the right to choose their own investment strategy.
The government declined to comment on Young's comments, which were made before the Treasury announced a raft of pension reforms at the weekend. These are part of Finance Minister Jeremy Hunt's efforts to stimulate the economy by freeing up billions of pounds of retirement savings to invest domestically.
The proposals include a requirement for defined contribution pension schemes to disclose from 2027 the amount of their investments in the UK. Funds will also have to publish data comparing their performance with rivals, and poorly performing schemes will be banned from taking on new business.
Announcing the changes, Hunt said: “UK pension funds appear to contribute less to the UK economy than their international counterparts, because they invest less in our domestic businesses. These requirements will help focus minds on how to improve overall returns and outcomes for savers.
Young said she would support any effort to make it more attractive for UK investment programmes. She said USS had already invested about half of its £73bn portfolio locally. “If the government wants to create investment opportunities in the UK, we would like to see that.”
Her comments reflect concerns in the pensions sector about how far the government can go to achieve its goal of directing more pension savings to UK businesses and enterprises, given the scale of the pressure on public finances.
Over the past year, the government has introduced a series of measures to encourage funds, which manage more than £1 trillion, to invest in high-growth unlisted companies, which can be more expensive assets for savers to hold in their retirement portfolios.
One of the key measures has been the introduction of the value for money scheme, which aims to encourage trustees to shift focus to returns, which may come from more expensive investments, rather than focusing solely on low-cost fees.
The City of London Corporation, which has teamed up with the government to channel long-term capital from pension funds into British companies, said the chancellor's new pension measures would “shift the trend towards driving investment into British companies”.
Separately, Young, who became CEO of USS five months ago, said she and other stakeholders are “working diligently” on ways to avoid a repeat of a long-running industrial dispute by university employees.
One cause of the dispute was USS's 2020 valuation at the height of the market crash, which posted a £14bn deficit and led to benefits cuts, leading to criticism of how the scheme was run.
These cuts were reversed after the scheme went into surplus after just two years.
USS, universities and union leaders have set up a working group to look at ways to make the scheme's funding situation more stable, Young said. “We are all moving in the same direction,” she added.
