UK - Debates surrounding the trashing of final salary schemes were fuelled this week when WM Company founder Dugald Eadie accused company directors of allowing greed and manipulation to drive their decisions.
His comments were part of a discussion, hosted by ratings agency Standard & Poor’s and the UK Society of Investment Professionals, on the landmark Unilever versus Merrill Lynch case, in which Eadie - ex-chief executive of Henderson - was due to have given evidence as an expert witness. An out of court settlement was reached before he was able to address the court.
Eadie described the recent spate of final salary scheme closures as directed by the “pure greed and manipulation by finance directors.”
He added: “[They] think that’s what shareholders want. It’s a bad thing.”
Eadie’s scathing attack comes on the back of calls on the Government by unions to legislate for workers’ rights amid the worrying trend.
Eadie also suggested that better efforts needed to be made by all parties to understand the risk parameters contained in any investment management mandate.
He said: If a consequence is to have highly prescriptive benchmarks, there is no obligation for managers to take them on. On the other hand, if a fund manager strongly believes that higher levels of risk are necessary to justify active management he should go for aggressive mandates.
Clive Gilchrist, chairman of the pensions committee of the Association of Corporate Trustees, focused on the problems of communication between trustees and fund managers - particularly in relation to soft issues not covered by formal investment management agreements.
Gilchrist said: It is important for fund managers and trustees to speak the same language. Merrill Lynch and Unilever was a lack of mutual understanding and a breakdown of trust.
By Madhu Kalia
Industry Voice: Sponsored by Eaton Vance
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Royal Bank of Scotland (RBS) faces a £102m impact on liabilities as a result of equalising guaranteed minimum pensions (GMPs), according to its annual results.