Commenting on the pension megafund news ahead of the Mansion House speech today, Alison Leslie, Head of DC Investment, Hymans Robertson, says:

“It is really good to see the Government making moves to improve value for members of DC Pension schemes, especially where they are in poorly performing arrangements. Scale helps provide the ability to access a wider range of asset classes to generate higher returns for members. Scale should improve value for members across all services including investment. However, care will need to be taken to progress to this. There must be a clear governance process to ensure decisions are made for member benefit. There are many well performing well governed smaller schemes in existence. There is also the risk of stifling innovation if the scale of the mega fund is too high and smaller providers, who are currently innovating, are crowded out.”

 Commenting on the governments’ announcements ahead of today’s Mansion House speech, Robbie McInroy, Head of LGPS Client Consulting, Hymans Robertson says:

“We are pleased to see the government has heeded the warning of the LGPS community and decided to seek solutions within the current structure of the LGPS. The LGPS is highly efficient at providing benefits and value for money for employers and taxpayers, but it is a delicate ecosystem. 

“Allowing the LGPS funds to continue to make the strategic decisions on asset allocation means that local accountability is maintained. Local control of pension costs is an important element of local service provision – a similar concept to the government’s devolution drive to empower regional areas. 

“The proposals also represent a significant increase in the services that the pools offer their funds. It is imperative that this is done in a way that doesn’t distract the pools from doing the day job of providing the required level of risk and returns for their funds.”

Commenting on the Government plans on regulating for growth and the missing pensions jigsaw piece of DB, Calum Cooper, Head of Pension Policy Innovation, Hymans Robertson says:

“We fully support the plans announced tonight on regulating for growth - the sentiment is to be applauded! Economic growth, however, is born of investment in enterprise and taking responsible rewarded risks. Our national risk appetite and culture needs to shift for us to grow, and it is good to see the government recognising that.

“Inadvertently private sector DB pension regulations have played a big part in sucking the investments, risk culture and life out of the economy. These regulations have been designed to eliminate risk in paying past pensions, at the expense of adequate pensions and investment for future generations. Sadly, however, whilst the PRA and FCA get a mention, there is no mention of writing to the Pensions Regulator to shift their mandate to support better pensions and economic growth. It would be great to see that happen, just as the Work and Pensions Select Committee asked of the prior government too.

“Whilst for pensions, DC and LGPS may be at the forefront tonight, on DB is the clock is ticking. Over 50% of the schemes that we surveyed are waiting to decide whether to run on to share surplus or move on with insurance. Regulatory clarity is key. Government cannot delay taking action much longer to empower surplus sharing to improve outcomes for members, employers and the economy. One of our asks of the Government (Pensions Plan) on DB was to set the Pensions Regulator a new objective focussed on improving pension outcomes for workers. The Pensions Regulator should be moved away from just protecting past generations of pensions as this has effectively unplugged our £1.4trn of private DB pensions from the economy. The regulatory goal should be to enable all pensions to plug back in to society, economy and future generational prosperity in retirement. Beyond that, clarity on surplus sharing and fiduciary duty is essential.”

Commenting on the Chancellor’s announcements about captive insurance in her Mansion House speech yesterday, Krish Kistnassamy, Head of General Insurance, IFS , Hymans Robertson, says:

“It is commendable that the new UK government recognises the significant contribution that insurance and associated services bring to the UK economy and its GDP. From an insurance perspective, we are supportive of both the government’s and the PRA’s efforts to introduce legal and regulatory changes to make it more attractive to set up captives and insurance special purpose vehicles (ISPVs) in the UK. A more flexible legal framework, combined with regulation that is more proportionate to the risks in these vehicles, would make it easier to set them up in the UK.

“In our view, the current UK captive and ISPV framework is stricter than it needs to be and the UK is therefore at a disadvantage relative to a number of other jurisdictions. The UK has a depth of underwriting, claims, administration, investment, broking, legal and actuarial expertise that already do work on Insurance Linked Securities (ILS) or captives. Making it easier to set up ISPVs or captives in the UK will allow a greater share of the fees for setting up and administering those vehicles to remain here and could support innovation for example in the casualty or cyber ILS space in general insurance.”