GLOBAL - The eighth ICMB/CERP Geneva Report on the world economy called for the development of hybrid pension schemes that would allow members to shift from DC to DB as they grew older.
The report said the creation of such schemes would permit older members to make the change in claims as they became more dependent on pension wealth for consumption.
Written by Tito Boeri , Lans Bovenberg , Benoît Coeuré and Andrew Roberts, the report took a stance on several issues concerning the future of pension funds.
The authors said there was a need for two-tiered governance of pension funds - with a supervisory board and a professional executive board to deal with the daily operations.
Mandatory participation in stand alone collective pension funds offering a limited number of default choices was also proposed.
The report also spoke of the harmonisation of accounting standards based on mark-to-market principles.
The authors said, “Although pension funds are becoming the largest institutional investors in global financial markets, they operate in a market containing a number of serious imperfections.”
Poor financial education of investors and managers, informational asymmetries in the delegation of saving and portfolio management decisions, imperfect labour markets and potential supply versus demand imbalances in financial markets were highlighted as key problems.
The authors said recommendations outlined were meant to help avoid a scenario in which "public sector pension systems crowded out private funded savings for retirement".
They were also aimed at averting the possibility of private sector pension funds shedding all risk to banks and governments.
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
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AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.