Actuaries and others within the pension industry have complained that the solvency requirement proposed last year by Professor Roy Goode's pension law review committee will encourage schemes to hold fewer shares and more government bonds. This is because of the risk of dipping below the threshold at which it may become necessary to inject new funds.
The long-standing outperformance of shares has given schemes the possibility of improving benefits to members. But Alastair Ross Goobey, chief executive of PosTel Investment Management and also a member of the Goode Committee, said this criticism was misconceived. He pointed out that the force driving pension funds to hold fewer shares and more gilts was not the minimum solvency requirement but the rapidly developing maturity of schemes.
The typical British pension fund has an increasingly high proportion of pensions in payment to members, requiring a more conservative investment strategy.
This development has been exacerbated by the thousands of employees who have been made redundant or taken early retirement during the recession.
Mr Ross Goobey said: 'It really is the age of the scheme that dictates the asset allocations and not our requirement for a minimum solvency standard.'
Without this standard, he said, the risk of pension scheme members losing their benefits on the collapse of the sponsoring employer was much more substantial.Reuse content