UK - More than nine-tenths of senior industry figures expect "unsustainable" defined benefit schemes to continue to close to existing members because of cost pressures on sponsoring employers, latest Penrose Financial research revealed.
The public relations consultancy's survey - which polled 150 senior figures at some of the leading pension funds consultants and investment management houses - also found more than eight-tenths of respondents believed the proposed system of personal accounts would fail to provide adequate incomes for retirement.
Respondents believed employers would simply level down their existing pension provision to the statutory minimum.
The survey also revealed one-in-three respondents feared the role of traditional investment consultants would come under threat as investors lose faith in consultants and demand more flexible solutions.
Almost 60% of respondents said fiduciary management will challenge the existing pension fund management model in the UK - even though one-third said pension funds would still value the advice of consultants.
In addition, the survey suggested multi-strategy investment managers, offering both alternative and traditional investments, would prove the most successful business model - with only one in eight envisaging such a positive outcome for traditional long only managers.
Some 74% of respondents thought pension funds would increase their exposure to hedge fund and/or other asset classes - while one in eight cited emerging market equities as one of the best asset class to invest in over the next three years.
Penrose Financial managing partner Sally Todd said: "This survey paints a picture of an industry in flux, with traditional models under increasing pressure from market upheaval, regulatory change and innovative new approaches.
"Though defined benefit pension provision is widely seen as unsustainable, at least for private sector employers, the outlook remains uncertain for defined contribution alternatives, and question marks clearly persist over the impact of personal accounts in 2012."
She added: "Although fiduciary management appears to have a bright future in the UK, practitioners in this space will have to prove themselves by producing strong performance.
"At a time of increasing consolidation, some investment managers face a tough fight for survival, with multi-strategy firms most likely to succeed. The diversified portfolio mix will remain popular, with global and emerging market equities, investment grade bonds and hedge funds expected to be attractive investments over the next three years. In such a climate of rapid change, innovation and flexibility will be required of all market participants, from pension fund trustees to consultants to investment managers."
The survey also found:
- Nearly half (47%) of respondents felt that tougher regulation would drastically cut the number of hedge funds, but most respondents felt the industry would survive, albeit with fewer stronger funds around.
- More than four out of ten respondents (41%) thought UCITS IV legislation would take more than two years to come into practice and would have less impact than UCITS III.
- Nearly half (49%) of respondents said that though the notion of decoupling in emerging markets is a reality, it will play less of a role in the future due to globalisation, and a quarter thought it was already defunct.
- Respondents were split over ETFs, with 45% expecting the class to ultimately rival mainstream funds, and 49% believing they would remain the preserve of sophisticated investors only.
- More than two thirds (68%) of respondents thought the era of the "star fund manager" will survive, and that fund managers with proven track records remain an appealing draw for investors, despite concerns about a 'herd mentality'.
The Howden Group Pension Plan has completed a full pensioner buy-in with Legal & General (L&G), insuring benefits for around 2,000 members.
Professional Pensions is looking to update its list of pensions master trusts in the UK ahead of authorisation. Can you help?
Concern about the potential impact on employer covenants has been rated the top risk for defined benefit (DB) schemes, according to a PTL survey.
Jonathan Stapleton says the DWP's progress on CDC is a welcome, and cautious, step forward.