UK - The professionalism of pension fund trustees has been called into question following last week's Merrill Lynch/Unilever settlement, leading to calls for a greater emphasis on fund audits and a scrutiny of manager contracts.
Several industry experts have raised eyebrows over the role played by trustees at the Unilever Superannuation Fund during Alistair Lennard’s underperformance, and their alleged “complacency” with regards to manager supervision.
One pension fund manager at a corporate scheme told IPN: “[Neither] party comes out well. But while Merrill may be seen by many as the guilty party, having to pay significant compensation in the settlement, at the back of my mind throughout the whole affair has been the niggle - what were the Unilever Trustees doing about monitoring their advisers/managers, particularly having employed a specialist investment officer whose role must have been to support the trustees in devising and then managing the scheme’s investment strategy?
“With so much focus on the dangers and difficulties faced by smaller schemes, perhaps this is a salutary lesson. Complacency is sometimes a consequence of size.”
Mark Grant, pensions partner, at law firm Cameron McKenna highlighted risks under the Pensions Act that fund trustees ran in “attacking” their investment managers:
“Pensions Act Provisions mean that trustees can now be personally liable for negligent investment of scheme assets if they did not select an appropriate fund manager or properly monitor them.
“Trustees must therefore be confident that they properly supervised their fund manager before they launch litigation against them.”
Chris Mullen, a partner at law firm Pinsent Curtis Biddle, said: “Trustees need to get used to asking for contract wording at the pre-beauty parade stage, so that it forms one of the factors by which they select a new manager, and so that comparisons can be drawn between the contracts of different managers.”
He added: “Trustees’ lawyers who have to negotiate contract wording with new managers which have already secured their appointment find the whole experience like boxing with an opponent which has already been told he has won on points and is sporting the championship belt.”
By Madhu Kalia and Luke Clancy
This week's top stories included Cardano announcing plans to acquire Now Pensions from a Dutch pension fund later this year.
Royal Bank of Scotland (RBS) faces a £102m impact on liabilities as a result of equalising guaranteed minimum pensions (GMPs), according to its annual results.
Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point