UK - Fund managers and consultants are predicting mandates worth "billions of pounds" in the wake of the government's decision to set up a Pension Protection Fund.
The industry-wide insurance scheme was unveiled as part of the government’s action plan to boost member protection.
The PPF – modelled on the Pension Benefit Guaranty Corporation in the US – will levy all private sector sponsored schemes and use the money to protect the pensions of members when a company folds or puts the scheme into wind-up.
The government estimates the PPF will raise up to £375m per annum in premiums.
But Hewitt Bacon & Woodrow partner Raj Mody said that because underfunded plans would be charged more for protection, the sheer size of the deficits faced by UK companies would result in the PPF collecting premiums worth billions of pounds.
As a result, fund managers believe that the creation of the PPF will lead to “juicy” mandates being put out to tender.
Mercer Investment Consulting UK head of manager advisory services Julia Hobart agreed.
She said: “I think much debate will take place before we get there, but everyone will be drooling over it no doubt.
“The nature of the mandates on offer may be very different, as there’s a lot to be debated and discussed before the fund – and what it’s actually going to do – pops out.”
But Mirabaud Investment Management’s marketing and client reporting director John Owens is sceptical about the prospects of massive PPF mandates being put out to tender.
“I don’t see there being a mandate frenzy, given the government’s attitude to the fund management industry,” he said.
“I don’t think it will be too willing to give investment managers any extra business except on the government’s own terms. How attractive that will be remains to be seen.”
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