Letter: Job of pension trustees is to stop such investments

Martin Wolf’s otherwise excellent article on “The economic consequences of Truss” (Opinion, September 21) suggests that previous governments have allowed “the search for safety in corporate pensions to shift portfolios away from the supply of risk capital to business to ownership of government bonds”. This suggests that previous governments could have done otherwise, but this is untrue.

Final salary schemes grew rapidly in the sixties and after; in the early years there were comparatively few pensioners, or members near retirement, and schemes were funded at levels well above the amounts that would have been needed on winding-up.

As schemes matured, these conditions changed — the need to protect the interests of members in retirement, or nearing retirement, and also a decline in the levels of funding of schemes meant that there was a significant decline in the proportion of funds classed as surplus. Only such surpluses should be invested in more risky assets in the hope of reducing the employers’ future contributions.

Investing in riskier assets any of the funds needed to guarantee members’ pensions would have been to gamble with those members’ benefits, something which the trustees of these schemes were, and still are, there to prevent.

David Linnell
Retired Fellow, Institute of Actuaries,
Loughton, Essex, UK


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