Pensions Regulator offers much needed guidance on investment best practice

Pensions Regulator offers guidance investment practice

KPMG responds to The Pensions Regulator’s guidance on defined benefit (DB) investment strategy, issued today. Simeon Willis

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“There’s currently huge disparity in how defined benefit schemes are run so advisers will find this a useful objective reference when steering clients towards best practice.

“Perhaps most importantly the regulator’s guidance acknowledges that the cashflow of a scheme should not be the sole measure of its risk. The industry has been preoccupied by ‘cashflow negative’ schemes – those that have more outgoings than incomings – but this neglects the fact that the level of risk a scheme takes should be based on a much wider range of factors, not least the strength of covenant. Currently people wrongly think that being cashflow positive means you can take more risk. This guidance reflects the wider factors that need consideration when assessing a scheme’s risk.*

“The regulator also highlights some of the challenges around the use of fiduciary management. This guidance builds on the FCA’s asset management competition interim report and makes it clear that schemes still retain responsibility for their investment strategy. Fiduciary managers need to be appointed with a clear mandate where conflicts of interest have been mitigated and appropriate independent advice taken.”

 

ENDS

 

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*See more on this in our recent report Cashflow isn’t such a negative

 

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 13,500 partners and staff.  The UK firm recorded a revenue of £2.07 billion in the year ended 30 September 2016. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.  

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