Updating the myners principles
"Regardless of the proposed changes to the principles, an insufficient governance budget still presents a major barrier to effective investment decision-making by trustees," he says.
Yet the principles reflect the times in which they were drafted. Trustees must now take account of the risks attaching to their scheme.Seven years after Paul Myners' review of institutional investment in the UK, it is easy to forget the main reason for the exercise.The government was worried that UK pension funds were not investing enough in private equity, and therefore not doing enough to help the UK's enterprise economy.Funds run the risk of implementing more complicated fund structures while not enhancing their governance structures adequately, creating a ‘governance gap'." Raynor says the updated Myners principles should encourage funds to match their governance structures to their investment approaches."At present there is a risk funds are trying to do too much with the governance arrangements they have in place." He also suggests that there is a need for more professionalism.Watson Wyatt says its biennial trustee self-assessment survey found evidence of concern among trustees at their ability to cope with managing their pension fund investments.
In particular they were concerned about their skills in being able to assess the effectiveness of their investment decisions.
In its response to the government's consultation, Watson Wyatt says that it believes the Pensions Regulator will not be able to deliver its risk-based approach to regulation if it relies on increased trustee knowledge and understanding alone to improve the investment governance of occupational pension funds.
Similarly, Russell Investments says in its response that "trustee training, while necessary, is not sufficient in our view to achieve the levels of professionalism required in today's complex investment environment.
Paul Trickett, (pictured right) European head of investment consulting at Watson Wyatt, says this downgrading of governance was inevitable: "The pensions landscape is now very different from 2001.
It is more complex and there are tighter regulations, enforced by a stronger regulator.
Now, as the UK government prepares to update these principles, it is worth asking whether they have had the effect that Myners intended.