By Gary Jarvis A Treasury review of institutional investment published today recommends a radical...
A Treasury review of institutional investment published today recommends a radical overhaul of the process by which pension funds carry out their investment decision-making.
As expected, the report by Gartmore Investment Management's chairman Paul Myners calls for greater investment freedom of pension funds including the ability to invest in private equity or venture capital - the most common form of investment.
It is hoped this primary aim would improve flexibility under the Minimum Funding Requirement (MFR); 'the minimum amount that a pension scheme has to put aside to guarantee payment to all the members of that pension scheme' and remove the necessity of investing in gilts and bonds, which historically ensure greater rates of return.
Myners' report, commissioned by the Chancellor of the Exchequer Gordon Brown in his 2000 budget speech, also suggests a number of other proposals for the industry to follow.
The broad thrust of these proposals is the upgrading of the pension fund industry to a professional status whereby those making critical decisions are paid in accordance to their investment responsibility. Myners' suggests that Trustees should be paid and that contracts should be negotiated with fund managers to work out investment strategies.
Myners' said: "The principles may seem little more than common sense. In a way they are - yet they certainly do not describe the status quo. Following them would require substantial change in decision making behaviour and structures.
Government officials today said that it would give the pension funds industry a two year time period in which to adjust its practices in response to Myners' proposals. Should the industry fail to respond the Government is likely to attempt to change the industry by legislation.
The majority of financial advisers (85%) believe the number of self-invested personal pension (SIPP) providers will continue to fall in the coming year, according to Dentons Pension Management research.
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