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Brexit-free zone

This initial post is a Brexit-free zone, not least because last weekend’s Financial Times was a good enough read to provide plenty of stuff to get us out of the starting blocks.  Monday’s Panorama provided some icing on the cake too.

The three FT articles were all grouped under Pension Crisis and reflect the fact that, despite 25 years passing since Robert Maxwell plundered the Mirror Group Pension Schemes, UK pension governance still has plenty of room for improvement.

The unusual appeal of ‘unsafe havens’ by Neil Collins asks if what used to be called “risk free but returning assets” known as gilts are now “return free risky assets”.  It considers whether a diversified portfolio of blue chip income stocks is the natural alternative.  Our view?  He’s probably right, so long as the horror of deflation does not become reality.

As we know, the ultra-low interest rate environment in which we find ourselves is certainly causing problems for pension schemes.  Perversely, loose monetary policy intended for stimulating business investment is hindering it because of the way that trustees are forced to value their liabilities and deficits.  In UK companies in line for help on pension deficits Ros Altmann, now Minister of State for Work and Pensions, pushes forward the discussion on whether Trustees are using the flexibility available to them to smooth funding costs.  Our view?  More and more trustees are looking at this – with the help of a robust assessment of their sponsors’ covenants.

The trilogy of Pension Crisis articles was rounded off by John Authers’ Time for a new model pension fund rescue.  We have long held the view that Defined Ambition, Targeted DC and even “Transparent With Profits” are the way to go and were disappointed when George Osborne scuppered the dreams of Steve Webb in his 2015 budget.  (The introduction of new DC flexibilities put paid to any near term chance of shared risk schemes taking off.)  However, following BHS, Tata, last night’s Panorama programme on pension liberation scams (bbc.in/29arSLm) and George Osborne’s imminent house move, it is quite possible that this issue gets raised again.  Our view?  We certainly hope so!

We hope you find the above as interesting as we did.  Please feel free to let us know at QuIP@quantumadvisory.co.uk.

In due course, posts will also be available via our Linked-In page.

The QuIP Team.

12 July 2016