DB Pensions Bounce Back to Provide Worked Example of Government's Growth Strategy

Self-belief and confidence about UK's Financial Services prospects can be bolstered when worked examples back the strategic aspirations.
 
That’s the idea set out in C-Suite Pension Strategies’ response to HM Treasury’s Call for Evidence.  Points raised are:
 

• The Financial Services Growth and Competitiveness Strategy is based on a well considered analysis.  What is needed straightaway is a worked example to show it will succeed.  Defined Benefit Pension Schemes can provide it.  The financial impact is large and it can be immediate – showing policy statements can be backed with incentives which adjust stakeholder thinking.  A high expectation of well directed follow up by regulators will help all parties recognise what has been achieved and remains expected of them.

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• Our response to the Call for Evidence follows up on suggestions already made to DWP on how to align DB schemes with the growth agenda.  A redirection of resources to benefit all stakeholders can be delivered.

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• Well funded schemes with strong sponsors can expect to run-on long term with an investment target at over gilts plus 150 basis points.  Surpluses are generated above discount rates used to assess liabilities.

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• A key driver is to change the “Fiduciary Duty” assessment of the trustees.  They have a legal expectation to take account of a package of financial incentives from Government; third party guarantees made available and discretionary benefit improvements.

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• Government monitoring of the actual impact of schemes by its regulators (TPR / FRC / CMA) will highlight what additional resource is becoming available to fund investment for growth and improve market liquidity.

 
“The City and wider financial services sector needs greater confidence and restored self-belief.  It should be expected to deliver more for the economy.  DB bounce back from the derisking overshoot – given impetus by Government policy commitment, incentives and outcome monitoring – can be a great worked example of what the Growth and Competitiveness Strategy can achieve”  William McGrath