Pensions investment and pot for life in Budget speech

Commenting on the Chancellor’s proposals to make pension funds to reveal more about their investments, Alison Leslie, Head of DC Investment, Hymans Robertson, said:

“The Chancellor’s initiative to disclose investment within the UK is aligned to the Mansion House reforms. The FCA will be concerned that this disclosure may lead to an expectation that more be invested in UK assets where potentially the investment case for doing so doesn’t stack up. There is a friction here potentially between the ambitions of Mansion House and the FCA’s duty to make sure initiatives protect members and the market framework.

“Return drivers are the key consideration of asset allocation decisions alongside diversification and risk management. If the investment case stacks up recommendations will be made to invest in the UK. Many argue however that the case for significant investment in the UK does not currently exist.

“The announcement on benchmarking against other schemes is not unexpected particularly against the largest >£10bn plus in assets. This will drive consolidation in the market. However, consideration still needs to be given to those schemes where, due to structure, it is and has been difficult if not impossible to move, for example those with GMP underpins. A solution to that has not yet presented itself and this remains a big problem.

“We look forward to the consultation to understand better how the Chancellor envisages various aspects of the measures will work.”

Commenting on the lifetime provide model (‘pot for life’), Paul Waters, Head of DC Markets, Hymans Robertson, said:

“Although it’s good that the Government has issued an update on the lifetime provide model, (‘pot for life’), there are a number of other initiatives in play to tackle our fragmented pensions system, such as consolidation and the pensions dashboard, which should be given time to deliver first, before pot for life. Only then will we know if we’re tackling the right problem. Radical developments like the lifetime pension model should be longer term policy considerations.”