UK - The new pensions regulator must be backed by a framework which stipulates its basic principles, a leading fund manager warns.
State Street Global Advisors group chief investment officer Alan Brown pointed out that funds frequently operated “under influences which arose as unintended consequences of regulation”.
And he warned that the government’s plans for a new regulator could be undermined if basic concepts were ignored.
Brown said: “Pension systems need tax incentives to work. Tax rules should not be so tight that they get in the way of a pension fund building up a decent level of surplus as protection against the inevitable rainy day.”
Brown said the government should avoid trying to build a system guaranteed to be free from failure as the cost would be too high. But he said key points needed to be understood.
He added: “Solvency and funding ratio rules need to take into account the long-term nature of pension liabilities, and should not be destabilising to firms in the short-term. There should be a symmetry of response to deficits and surpluses.
“The accounting rules should not be driving the risk posture and investment decisions of pension funds.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.