12.11.12
Pension schemes ‘time-bomb’ in London
An urgent review of London councils’ pension schemes is needed, according to a report by the Pensions Institute.
The schemes represent a “ticking time-bomb”, the report states, with trustees of the schemes found to be delaying recovery plans to save money. It wants Department for Communities and Local Government to review its own procedures to tackle the problem.
The widening gap between the costs of providing retirement incomes for workers and the available funds to do so is due to rising life expectancy rates, as well as falling investment returns.
The Public Services Pensions Bill currently going through Parliament could reduce the annual cost to taxpayers by a third, the report suggests.
The report says: “The London local government pension schemes in aggregate represent a ticking time-bomb for London council tax payers and very likely for national tax payers too. But, we believe it is possible for this time-bomb to be defused if the relevant stakeholders act now.”
A merger of pension schemes could save administration costs, but has so far been blocked by councillors and trade unions.
Mike Taylor, head of the London Pensions Fund Authority, told the Guardian: “This report pushes us further forward in the debate over the merger of local authority funds.”
Separate research by MetLife Assurance shows that nearly three quarters of pension scheme trustees surveyed across the country (71%) feel that the amount of legislation and pace of change in the pensions industry is too much, with nearly half (47%) saying they are hindered in performing their duties
The company’s CEO, Wayne Daniel, said: “It is concerning that some trustees feel they are being hindered in performing their job as a trustee, in particular due to the amount of legislation and pace of change. The fact that trustees of larger schemes worry about being able to perform their duties may hinder their efforts to find appropriate de-risking strategies that fit the unique needs of their scheme.
“There is an evident lack of knowledge by trustees of how to prepare for a de-risking exercise even though two-thirds are planning to de-risk the company pension scheme in the next five years.”
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