A group of leading pensions experts were yesterday summoned to 11 Downing Street and told to improve the standards for governing the £800bn held in UK pension funds.
The Chancellor, Gordon Brown, Ruth Kelly, the financial secretary to the Treasury, Patricia Hewitt, the trade and industry secretary, and Baroness Hollis of the Department for Work and Pensions, yesterday met with Christine Farnish, chief executive of the National Association of Pension Funds, and other representatives from the pensions industry to discuss progress of the Myners review.
This review, carried out by the former Gartmore chairman Paul Myners, was set up in 2000 to examine why pension funds were not investing in small businesses. Mr Myners reported his findings in 2001 and said the knowledge and expertise of the trustees that were appointed to look after company pension funds and make decisions on how funds were invested needed to increase.
"The level of government representation at the meeting shows the interest there is in making the most of the investment capital available in the UK in ensuring a productive economy," Ms Farnish said yesterday. "It was a very constructive meeting as the industry has been doing a lot of work on these issues, but clearly there are areas where the Government wants things to move faster."
The Government spelled out at the meeting which areas the industry must work on. Its main concern is that not enough progress is being made on educating trustees on where to invest their scheme's assets. Most pension funds are invested heavily in equities, which, as stock markets have collapsed in recent years, has left them with deficits running into billions of pounds.
"Where pension funds invest their assets is the biggest decision they will make as it has to be appropriate to the liabilities of the scheme," Ms Farnish said. "Trustees have a hefty responsibility as every penny counts in the pension fund and we spent a lot of time talking about how we can improve skills to strengthen this area."
Another concern is that many pension fund trustees are too reliant on consulting actuaries and employee benefits companies, which earn huge fees from advising trustees on how to run their schemes. There are also fears that trustees assess investment performance on a short-term basis, which can lead to fund managers being sacked unnecessarily.
Yesterday's meeting came against a backdrop of plummeting confidence in company pension schemes. Many companies are battling against the rising costs of their pension funds, and are closing funds and cutting back on the retirement promises they have made to staff.
Up to 60,000 workers, some having contributed to their company pension schemes for decades, are already facing penury in retirement after their companies became insolvent and were unable to meet pension commitments.Reuse content