Friday, 15 December 2017

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    Getting a grip on regulation

    Newton Investment Management’s Catherine Gill explores the findings to Pensions Insight’s independent trustee research 

     

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    Catherine Gill, Institutional business development manager, Newton Investment Management

    The findings from this year’s Pensions Insight Independent Trustee Survey reveal once again the increasingly demanding regulatory environment facing most pension schemes today. Almost half of respondents cite keeping abreast of increasing regulatory demands as the biggest challenge lay trustees face, and, as the panellists in our discussion on page 10 conclude, the issue is not going to ease any time soon.

    In fact, increased regulatory complexity is cited by 46% of respondents as the primary driver behind the growth in the number of professional trustees in recent years.

    In terms of the biggest challenge defined benefit (DB) schemes face, the survey shows that the greatest concern for 34% of respondents is over the persistence of low real yields (down from 42% last year), while sponsor covenant strength is the biggest worry for 27%. How to improve funding levels is cited as the biggest issue by 26% of respondents.

    These concerns come against a backdrop which entails most schemes having to face up to generally declining contribution rates, as many schemes close to new members while growing numbers of retirees are drawing funds from them. Faced with this predicament, it is perhaps no surprise that lay trustees are seeking different methods to tackle their funding requirements.

    Some 60% of respondents expect to seriously consider liability-driven investment (LDI) for their scheme, with another 41% considering income-focused strategies as a potential solution for their negative cash flow predicament. With consultants and investment managers offering a raft of different investment options, 39% of respondents feel fiduciary management should be something to consider over the next two years.

    For defined contribution (DC) schemes, the survey reveals that the biggest concern is member engagement, with over a third of respondents putting this top of their list of challenges. With today’s typical millennial DC scheme member facing a number of financial headwinds such as high rents, student debt and difficulty getting on the property ladder, encouraging them to save for retirement is often a tough ask. We suspect this may continue to be the case for some time, so it is crucial that trustees, consultants and investment managers all work together to promote the benefits of regular saving for retirement.

    Find out more in Pensions Insight’s Independ Trustee Research here.

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