The recommendation came in response to the consultation on how to update the Myners principles, which is being coordinated between the Treasury, the Pensions Regulator and the Department for Work and Pensions.
Guy Willard, a consultant at Hewitt, said: “It remains difficult for trustees to effectively challenge and adequately monitor more complex investment areas, such as those involving derivative strategies.
“For this reason, we are witnessing increasing interest from some clients in a consultancy approach, centred on firm investment recommendations. In this context, the best-practice guidance on managing and contracting external advisers would benefit from a more comprehensive explanation.”
Hewitt also backed the creation of an Investment Governance Group (IGG) that would co-own the principles, monitor the quality of reporting against them and make recommendations for improvements to investment decision-making and governance.
Guy Mills, a consultant at the firm, said: “We are optimistic that the IGG will go some way to addressing trustee boards that have adopted a tick-box mentality.”
Watson Wyatt also gave support to the proposed updates to the Myners principles, but made the following stipulations:
- the proposed approach does not add to the already heavy administrative and compliance burden on trustees;
- the role and powers of the proposed IGG is aimed at reducing this burden for the majority of well-run pension plans and not adding to it;
- the proposed approach is primarily focused on helping smaller schemes as defined in the consultation document;
- the IGG does not add to the overall cost of running a pension plan.
