UK - Trustees need a common standard for company accounts, scheme valuations and investment reports to match assets and liabilities, successfully, RailPen Investments claims.
RailPen head of asset strategy Stephen Lowe said the industry must devise an objective standard that addressed the accounting needs of a sponsoring employer and the long-term investment requirements of trustees.
He said the current mismatch between results in investment reports, actuarial valuations and accountants’ reports meant that schemes could find themselves in deficit – despite making successful investments.
Lowe – speaking at the Institute of Economic Affairs’ Future of Fund Management conference – said any common standard had to align pension fund valuations with “real economic drivers” so that it could serve as the basis of a scheme’s investment policy.
Lowe said: “It’s a massive and growing problem. But for all the good work done so far, I can’t see we’re any closer to the answer.”
BAA group pensions manager Eric Hunt told delegates that employers’ increased interest in scheme performance, government efforts to boost member protection and accounting standards such as FRS17, meant that traditional investment consultants could find themselves “falling by the wayside”.
He forecast that as employers took on a greater role in setting scheme investment strategies, they would turn to accountancy firms.
Hunt explained: “Funding issues and investment strategy are only of legitimate interest to employers.
“There will be a change in the relationship between trustees and employers. The suggestion is that accounting firms will become the dominant force in investment consultancy as their solutions are more focused on company balance sheets, rather than trustees’ investment responsibilities.”
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