Pensions World

Defective DC?

I read your editorial "Defective DC!" (PW, December, p1) with interest, but I am dismayed that we are still talking about needing a re-think instead of talking about the new ideas being implemented out there.

Professor Robert Merton gave an impressive presentation at the NAPF investment conference, showing where DC was going wrong and how to deliver greater control over pension outcomes using what he termed managed DC.

The Cass Business School has demonstrated the ineffectiveness of lifestyling and target dated funds and suggested outcome orientated solutions are needed, the same message as from Professor Merton.

Lord Hutton has called for managed DC outcome orientated solutions.

I suggest the thinking has been done. It is just not getting any exposure or being widely debated. Professor Merton had to speak from a theoretical perspective so the fact that managed DC is actually available from Dimensional Fund Advisers, the US asset managers, was not evident.

Is managed DC the answer?

There are excuses for people thinking it is just theory, which is frustrating as we have already adopted managed DC for our clients.Unfortunately, managed DC leaves little space for the current dominant players to be involved, whether providers or advisers, so is being largely ignored.

Looking at the articles on DC in the December issue: Allison Plager’s comprehensive survey (p35) touches on various solutions, including master trusts and collective DC, but tellingly says "…employers have to make do with what is out there...". Her article therefore focuses on the products available and various problems encountered, but no mention of managed DC. Martin Hayward’s article (p40) "Customer focus" assumes we need to be selling pension products to employees. Steve Watson’s "Fortune favours the brave" (p42) identifies the core problem which managed DC addresses, the focus on the wrong risk, such as asset volatility.

We are discussing each individual piece of a jigsaw instead of what the finished picture looks like. Perhaps you can help put the pieces together?

Malcolm Delahaye

Director, Supertrust UK

malcolm@supertrustuk.com

In-house investment

My attention was drawn to Anthony Hilton’s recent article “Household management” (“Investment Brief”, December issue  of Pensions World (p15)). I would like to applaud you for a particularly insightful piece of work, shining a very welcome light (in scheme members’ eyes at least) into a very under researched area.

Keep up the great work.

Hugh Smart
Chief Investment Officer
British Steel Pension Fund
H.Smart@bspf.co.uk

(PS You might have seen that our fund has been awarded joint winner of the Best European In-House Investment Team/Pension Fund Owned Asset Manager in the recent IPE2011 Awards in Brussels).