UK - Pension scheme asset allocation decisions should be taken away from trustees and handed over to finance directors, a top-level discussion group heard.
Chairman of metals producer Lonmin, Sir John Craven, said that as that as companies were increasingly affected by pension scheme liabilities they should take more of a role in deciding how those assets are invested.
Sir John - who is also a non-executive director of Reuters - was speaking at the the Centre for the Study of Financial Innovation's 'Changing Shape of Pension Assets' which was held at the ABI.
Other speakers agreed and noted that it was difficult for trustees to understand the effects that the pension scheme investment would have on the company and the amount of risk they were taking on.
Former Association of Corporate Treasurers chief executive David Creed said: “Leaving asset allocation to trustees is a big mistake. It’s like asking passengers in an aeroplane how it works and how to fly it.”
He added: “You must leave the decisions on asset allocation of the pension scheme to finance directors and the company advisors.”
Consultants disagree with this logic and say that trustees have the ultimate responsibility for the investment fund and companies only have a consultative role.
Buck Consultants managing director David Kershaw said: “At the end of the day it is the trustees themselves who have to take these decisions after receiving advice.”
He added: “Under the Pensions Act the trustees have responsibility for the investment and only have to consult the company which could be no more than telling them what they intend to do rather than getting advice from them.”
By Jonathan Stapleton
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