Standard Life Investments, the global investment manager, today hosted a seminar in London for local authority pensions schemes at which The Rt Hon Lord Hutton of Furness discussed the ongoing developments following his report and recommendations on public service pension reform last year.
In a stimulating and lively exchange, delegates debated the issues facing local authority pension schemes against the background of low growth, fears about recession, the complex eurozone situation and concerns over inflation.
Addressing the seminar, Lord Hutton said:
"We have come a long way and people should be congratulated for the effort and commitment they have made to get the issues surrounding public sector pensions moving in the right direction. There have been some tough calls to make but we have made them. This is good news for taxpayers and scheme members alike. My work to date on public service pensions has been designed to ensure that we find a way to maintain defined benefit (DB) schemes going forward for as long as possible. Whether we are successful or not, only time will tell. But I believe we have helped to lay the foundations for an enduring settlement in the public service schemes.
"Having moved the debate on public sector pensions forward, today the much bigger challenge we face as a society is out with the public sector and concerns how to improve the outcomes for those in defined contribution (DC) schemes. It is DC not DB that will have to do most of the heavy lifting for future generations of savers. DB is not going to make a come-back. This is the direction the debate on pensions in the UK needs to move. We should be focusing on outcomes not structures.
"I am delighted that the Government have begun a debate about improving the performance and regulation of DC schemes. Here too we need the market to innovate, to focus more on outcomes rather than simply trying to manage investment volatility, and so give people the chance to aim for a given level of retirement income. This is where the market needs to move to. We need regulators to support this movement towards better outcomes. And we should guard against legislation that might be well intentioned, but which might have serious adverse consequences - like the attempt to impose something like Solvency 2 standards on to DB schemes or statutory minimum returns on DC plans.
By all means, let us study alternative systems around the world. But let us keep this important debate focused on the central issue in front of us - how do we help the next generation of employees build up an inflation proofed retirement income that will stretch to cover the many extra years we are all living?"
Len Currie, Investment Director, Local Authorities, Standard Life Investment said:
"The adage that 'old age doesn't come alone' remains true and how we adapt to the economic and financial implications of an ageing society will be critical. Standard Life Investments continues to be fully engaged with the local authority market to help it meet some of these challenges with innovative and tailored investment solutions designed to cope with future market uncertainty."
Andrew Milligan, Head of Global Strategy at Standard Life Investments, Nick Vickers, Head of Financial Services at Kent County Council and Graeme Muir, Partner at Barnett Waddington also spoke at the seminar.
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