Paul Myners defended his review from a barrage of criticism from fund managers and investment consultants at a seminar held last week by the Pension and Investment Research Consultants.
In the last two weeks, the cautious praise which initially greeted Myners’ review of institutional investment in the UK has turned sour and with formal criticism to the Treasury earlier this month, in some cases, being hostile.
The chairman of Gartmore defended his review and said: “My report is about transparency, about accountability and doing things better. I am trying to raise the bar of the standard of behaviour and conflict. The principles must be voluntary. I have avoided being dogmatic or prescriptive.”
William M Mercer UK practice leader Andrew Kirton described Myners’ recommendations on brokers’ commissions as a “bombshell”. He said that there is a relative ignorance of how the system works and deems the existing structure as rather odd.
Myners recommendation that the fees paid to fund managers be more transparent and included in management fees has been criticised as having “serious unintended consequences”.
Myners said: “With any proposal there are unintended consequences and there absolutely are unintended consequences with the existing regime. It is not perfect.”
He has also been criticised for not adequately consulting on this issue. Myners admitted that he “did not consult extensively because [he] came to the issue later in the process”.
Providing the fund manager’s reaction to the Myners report, JP Morgan Fleming Asset Management’s managing director of strategic relationships, Geoff Lindey, said that there are serious errors in the report itself. He also said the minimum funding requirement was “thoroughly bad legislation that doesn’t address and never did address what it was meant to address”.
Myners rebutted Lindey’s suggestion that MFR’s replacement should be a Central Discontinuance Fund – an insurance fund for defined benefit or final salary pension schemes, funded by the state or industry, that bails schemes out when they wind-up – arguing such a replacement funding regime would be a moral hazard.
Myners added: “I was conscious every time I wrote something on pension funds. Was I going to do something which would undermine the concept of the defined benefit scheme. I think if I proposed a CDF it would be seen by other people as another argument for winding up DB schemes.”
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