A pension trade body has called on the government to use its Mansion House Reforms to help resolve intergenerational unfairness within pensions.
The call was made by the Independent Governance Group (IGG), the UK’s provider of professional pension trusteeship, scheme governance and pensions managerial services.
It was responding to two Mansion House pension scheme consultations: Options for DB schemes and trustee skills.
According to IGG the way defined benefit (DB) schemes conservatively manage risk prevents more innovative use of pension scheme assets to support the UK economy.
It said sponsors should be offered the chance to deploy some, or all, of that surplus to boost defined contributions (DC) ahead of winding-up the scheme.
IGG explained that supplementing DC funds in this way would promote investment in productive assets and help close the gap in outcomes for DB and DC scheme members.
It added that it is a key driver in the growing financial divide between generations.
IGG chief executive officer Andrew Bradshaw said: “We believe fresh thinking and new ideas are required in order to realise the chancellor’s ambition. We have proposed ideas regarding surplus reforms within an appropriate framework and with clear and proportionate regulatory supervision.
“We believe this approach will enable trustees to demonstrate to sponsors how schemes can invest in productive assets with acceptable levels of risk and with members’ interests at the forefront. This is a win-win for employers, the government and the UK economy.
“At the same time, the recent increase in pensions-related regulation and legislation, coupled with major events such as the LDI crisis, means the need for a higher level of knowledge and understanding on trustee boards has never been greater.”
In July the chancellor, Jeremy Hunt, announced a package of reforms designed to boost pensions and increase investment in British businesses.
The plan includes unlocking up to £75bn of additional investment from DC and Local Government Pension Schemes (LGPS) to grow the economy and deliver benefits to savers.
Hunt suggested that the DC reforms could increase a typical earner’s DC pot by 12%.
In its response to the call for evidence on Pension trustee skills, capability and culture, IGG highlighted seven barriers which government needs to address across DC and DB schemes for its plans to succeed.
IGG warned against the risk of deterring people from becoming lay trustees.
“We support a move to mandate the appointment of a professional trustee for all schemes over a workable timeframe, but caution against the potential unintended consequences of implementing an accreditation regime for lay trustees that deters people from coming forward,” Bradshaw said.
“The broad range of skills, qualifications, and experience of lay trustees, together with their first-hand knowledge of the businesses that sponsor pension schemes, is a vast resource that has helped to underpin good governance.”
Independent Governance Group works with over 460 schemes with a combined asset value of approximately £355bn.
Schemes range in size from the low millions to multi-billions, with over 10% of the group’s schemes being £1bn+.
The group was established in 2023 following the merger of Ross Trustees with Independent Trustee Services.
The 160+ team includes pensions expertise drawn from many different backgrounds, such as investment specialists, lawyers, actuaries, pensions managers and consultants.
