UK - The Pensions Protection Fund could encourage trustees to make high-risk investments, lawyers warn.
They say trustees are likely to invest more “adventurously” – particularly in equities and hedge funds – after the PPF is introduced because they know members’ pensions will be protected.
Lovells partner Jane Samsworth (pictured) said: “Trustees might speculate to accumulate if they think their members will be insulated from the worst effects if it does fail.
“It is going to give them a level of confidence currently lacking and they could review their investment strategy.”
She added: “At the moment they are trying to reduce their risks by diversifying and reducing their equity holdings in favour of bonds. After the PPF there could be a take-up of hedge funds.”
Norton Rose partner Lesley Browning agreed it would be an “influential factor” in trustees’ decision-making.
Independent trustee Thomas Eggar Trust Corporation agreed it could encourage more high-risk investment – although it expects the government to put certain limitations in place.
Director Vernon Holgate said: “I think the PPF will take into account the type of investment trustees are making.
“Otherwise it would give us carte blanche to back the 3:30 at Doncaster.”
Pensions advisory service, OPAS, chief executive Malcolm McLean agreed.
He said: “I am sure that in devising the government’s risk-based additional levy charges, such factors will feature.”
PP has compiled a list of what to watch out for over the coming months.
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