UK - Large pension schemes have made strides in applying the recommendations in the Myners report, but small pension funds are lagging behind and the greatest progress is often consultant rather than trustee led.
Those were the findings of a survey of 1,580 pension scheme trustees carried out for the UK Department for Work and Pensions (DWP). The survey analysed the extent of voluntary progress in implementing the Myners principles - recommendations for pension scheme trustee investment decision-making set out in a 2001 report written by former Gartmore head Paul Myners.
A majority of trustees boards had formally considered the five principles and decided to act on two of the principles - asset allocation and clear objectives, the report noted. Only 18% of the schemes surveyed said they had not considered or had decided not to act on the principles.
Trustees have often managed this process with limited resources, the survey said. Trustees spent an average of 10.6 hours per year in board meetings, and of those, less than 4 hours were devoted to investment matters. The amount spent on investment issues varied between 2.3 hours for schemes with 12-99 members, 5.3 hours for schemes with 1,000 - 4,999 members and 9.4 hours for schemes with 5,000-plus members.
The extreme differences in resources allocated to this process is a demonstration of the tiering of the pensions marketplace between larger and smaller schemes, said Nick Watts, European head at Watson Wyatt.
“I think the spend on pension affairs is a problem,” Watts said. “If you look at the costs of running a pension scheme, most of those costs are agency costs, in particular transaction costs. Most of them don’t help with making any progress here, so I think a redistribution of the spend towards more resource within the pension fund to move ahead on those issues would be helpful.” The report also found that trustees had done little on three of the principles - performance measurement of investment consultants, performance measurement of trustees and shareholder activism, and in this area, investment consultants led the way.
However, Watts noted that the report was conducted last year and that many pension funds had worked on their responses to the other principles in the past year.
“I think a year is quite a long time and there’s been significantly more progress,” he said. “The area where obviously they want to see more progress, and they recognise that a lot of the initiative has been driven by the players themselves is measuring investment consulting.”
Watson Wyatt has developed a quantitate measure of their manager research and selection and more schemes are requesting an annual review of their performance, Watts added.
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