U.K. FUNDS EMBRACING EMPLOYEE TRUSTEES
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Digital Alpha raises more than $1 billion for infrastructure fund
      John Haggerty
      Sector’s risks need to be weighed, consultant says
      A healthcare worker provides care for a COVID-19 patient in the intensive care unit at the Saint Joseph hospital in Marseille, France, on Nov. 20, 2020.
      Private equity’s health-care role draws spotlight
      Some alternative strategies struggle in first quarter following tough 2020
    • Daniel Celeghin
      Indefi hires New York-based managing partner
      Hub International continues buying spree with IBG acquisition
      Callan brings on 2 executives
      Hub International agrees to buy Plan Sponsor Consultants
    • American flags outside the New York Stock Exchange
      Stock shorts collapse as no hedge fund wants ‘head ripped off’
      Michelle Dunstan
      Move to link exec pay to ESG integration growing
      The J.P. Morgan Chase logo displayed at a branch bank
      J.P. Morgan sells $13 billion of bonds in largest-ever bank deal
      John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
    • Pentegra joins with EPIC to offer 3(16) fiduciary services
      Interest rises in keeping retiree assets in-plan
      Joseph Healy
      Smaller DC plans place greater focus on improving financial wellness efforts
      Pentegra launches pooled employer plan
    • U.S. likely to join Europe in mandating climate risk disclosure – John Kerry
      Environment Agency fund pledges to reduce carbon emissions by half by 2030
      MSCI urges capital markets players to act on net-zero ambitions
      Michelle Dunstan
      Move to link exec pay to ESG integration growing
    • Riscura stories
      Dystopian tales explore altered retirement reality
      Joel Holsinger
      Ares wants to do good – and profit – with fund
      Girls Who Invest
      MetLife plans 3 internships for Girls Who Invest scholars
      Model home
      Resmark sees niche in buying, leasing model homes
    • Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      Hedge funds post best first-quarter return since 2000
      Jason Kephart
      Managers see good times ahead in 2021
      Jev Mehmet, CEO of Brevan Howard's Coremont unit
      Brevan Howard runs $50 billion unit like BlackRock’s Aladdin
    • The headquarters of the California Public Employees' Retirement System, Sacramento
      CalPERS board votes to add long-term comp for CIO post
      High-yield spreads narrow, default rates drop
      U.S. likely to join Europe in mandating climate risk disclosure – John Kerry
      Environment Agency fund pledges to reduce carbon emissions by half by 2030
    • Jake Cabala
      Patient Square Capital adds head of fund partnerships
      Carrie Peluso
      SSGA promotes executive to head of global manager research
      Invesco logo shown on the floor of the New York Stock Exchange
      watch video
      1:28
      Invesco’s bid for performance gains
      Ameriprise, Amundi add to their European rosters
    • The headquarters of the California Public Employees' Retirement System, Sacramento
      CalPERS board votes to add long-term comp for CIO post
      Ventura County Employees adjusts target allocations after asset-liability study
      PennPSERS boosts employee contribution rates after reporting error
      Melrose Industries to plug U.K. pension deficit by selling assets
    • David Greenberg
      The California Endowment finds internal candidate as next CIO
      Daniel Celeghin
      Indefi hires New York-based managing partner
      Carrie Peluso
      SSGA promotes executive to head of global manager research
      Cohen & Steers adds team for new private real estate business
    • European private equity deal value, volume hit records for first quarter
      Paul Morrissey
      Blackstone Growth picks managing director to lead European investing
      Bills of euro, dollar and pound currencies, among others
      Ardian closes latest buyout fund at $8.8 billion
      Hand typing on stationary iPhone at an office reception desk
      Private equity’s taste for tech spurs $80 billion deal spree
    • BentallGreenOak closes latest European fund at $2.3 billion
      Cohen & Steers adds team for new private real estate business
      Australia’s Centuria makes takeover bid for Primewest
      CalSTRS indutrial property
      Investors hungry for industrial properties
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
    • A coin representing Bitcoin cryptocurrency in the U.K.
      Cryptocurrency and digital assets
      Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • New York State Common slates $400 million for renewable energy
      Texas County commits $100 million to another Taconic credit fund
      GPIF prepares to make first direct alternatives allocations
      Ohio State Teachers calls on Hellman & Friedman buyout fund
    • New York State Common slates $400 million for renewable energy
      Texas County commits $100 million to another Taconic credit fund
      GPIF prepares to make first direct alternatives allocations
      Ohio State Teachers calls on Hellman & Friedman buyout fund
    • Emerging Market Debt Manager Services
      Real Assets Consultant
      Passive Investment Management Services
      Active Extended Global Credit Manager Search
    • High-yield spreads narrow, default rates drop
      Private real estate funds continue rebound
      Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Marcie Frost
      CalPERS: Urgency underscores all areas of providing retirement security
      BPTW cartoon
      P&I’s Best Places to Work marking a milestone
      CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
    • Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      COVID-19 Makes LP Portfolio Management More Important Than Ever
      China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
    • John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
      Jake Remley
      Commentary: Inflation expectations vs. reality in the bond market
      Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
    • Marcie Frost
      CalPERS: Urgency underscores all areas of providing retirement security
      Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      In Challenging Markets, Systematic Global Macro Strategies Could Hold Opportunity
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • Invesco logo shown on the floor of the New York Stock Exchange
      watch video
      1:28
      Invesco’s bid for performance gains
      watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Investing in infrastructure at the right price
      Time for Action: Shifting Pension Dynamics from a Macro and Regulatory Relief Perspective
      Understanding the PEP Evolution
    • POLL: Cryptocurrency investing
      POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • High-yield spreads narrow, default rates drop
      By the Numbers for April 2021
      Graphic: Invesco’s bid for performance gains
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
      Retirement Income Conference
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Investing in infrastructure at the right price
      Time for Action: Shifting Pension Dynamics from a Macro and Regulatory Relief Perspective
      Understanding the PEP Evolution
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
November 14, 1994 12:00 AM

U.K. FUNDS EMBRACING EMPLOYEE TRUSTEES

By Joel Chernoff
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    LONDON - Most U.K. pension executives accept employees as plan trustees, but are reluctant to make them full partners in the investment process.

    Member trustees are expected to become a reality for the entire British pension universe in the next Parliament. The queen's speech, slated for Nov. 16, will lay out the government's legislative priorities for the coming year - including a major pension bill that likely will require all retirement plans have at least one-third of their trustees, with a minimum of two slots, filled by plan participants.

    Already, about two-thirds of U.K. pension funds have at least some form of employee representation, according to a survey by consultants Bacon & Woodrow, London, although just more than half have the minimum one-third participant representation proposed by the government.

    "We certainly feel they add value," said Hugh Brown, head of pensions at Imperial Chemicals Industries PLC, Welwyn Garden City.

    The idea of any power-sharing is anathema to U.S. pension executives. Many American pension executives fear that giving employees a say in the investment of pension funds would lead to more conservative investment postures or even socially oriented investments.

    The issue is loaded. When Rep. Peter Visclosky, an Indiana Democrat, tossed in an amendment in 1989 legislation that would have mandated joint trusteeship of U.S. pension plans, pension executives saw red and threatened the demise of their defined benefit plans.

    If asset mixes were more heavily weighted to lower-returning bond strategies, pension executives in both countries say their corporations will end up picking up the tab to their defined benefit plans.

    Maxwell's legacy

    In the United Kingdom, the push for mandating member trustees stems from the late Robert Maxwell's plundering of his companies' pension funds. Many British pension experts came to believe member trustees would provide a valuable safeguard for pension assets. Maxwell plans did have member trustees, however; the problem was that Mr. Maxwell fired those who disagreed with him or promoted labor trustees to management roles.

    Amending a recommendation in the U.K.'s Pension Law Review Committee, the Department of Social Security backed mandating that all retirement plan trustees be composed of at least one-third participants and retirees. Participants would have to be given at least two slots, except for plans with fewer than 100 participants.

    The problem for U.K. pension executives is that the white paper would have required participants to vote on whether they were satisfied with current arrangements, many of which permit employers or committees to nominate participant representatives. Employers warned putting the procedure to a vote would have been costly and cumbersome.

    William Hague, minister for Social Security, recently indicated employers will not have to disturb current arrangements that already provide participant representation, unless an unstated proportion of employees object.

    For many pension executives, that statement provided welcome relief. Mike Stockwell, manager of employee benefits for the 450 million ($730 million) Kodak Ltd. pension fund, Hemel Hempstead, said the company can live with the rules as long as the government continues "to back off." Four of Kodak's nine trustees are participants, but are elected by a company-created panel.

    Trustees' interests aligned

    While some British employers, particularly among smaller companies, resist the notion of having member participants, U.K. pension managers on the whole are comfortable with the idea.

    "We have not experienced any difficulty whatsoever in the 11 years in which we've had member trustees on the board," said Peter White, group pensions manager for Tate & Lyle PLC, Bromley. The 480 million fund has an equal number of employer- and employee-nominated trustees on its 10-member board.

    U.K. pension officials believe member trustees provide added security for participants, a valuable contribution to the management of their plans, and greater confidence of workers in decisions that are made.

    Experts say that both participant and management trustees' interests are closely aligned. "I can't think of any times when there was any polarization," said ICI's Mr. Brown of his fund's 13-member board. The board includes six management trustees, six employee trustees and one independent trustee.

    But the government's proposal would enhance the role of trustees, particularly on investment matters. The white paper clearly states that all advisers - including money managers, the actuary, auditor, lawyers and administrator - will be instructed by the board and not by the employer. In addition, trustees might get a more powerful say on the division of pension surpluses between employers and benefit increases.

    Trustees will be responsible for their funds' investment policy, and will be guided by a prudent investor rule. Disturbing to some U.K. pension experts is that trustees will have to consult the employer on investment matters - but will not have to reflect the employer's views.

    This issue, on top of mandatory cost-of-living adjustments and new minimum solvency rules, might drive U.K. companies with U.S. parents to shift to defined contribution plans, according to consultants at Towers Perrin, Newbury.

    Some non-U.K.-based multinationals will take the opportunity to switch to defined contribution plans on the back of the regulation, but U.K. employers already are adopting member trustees to get ahead of the legislation, said Richard Malone, European policy director for Sedgwick Noble Lowndes, Croydon.

    Participants' say limited

    In reality, U.K. trustees tend to have relatively little to say about investment matters in many companies. Many British pension executives do not believe they will have to change their arrangements under the proposal.

    Trustees "do not get involved in the day-to-day" management of the pension fund, said Alan Herbert, head of pensions at the 6.5 billion British Petroleum Co. PLC, Hemel Hempstead.

    Rather, asset mix decisions are debated at the fund's investment committee, which is composed of two senior BP officials and four top-level investment professionals, including the top executives of Robert Fleming Group and property manager MEPC PLC.

    At the internally managed 4.5 billion ICI pension fund, there also exists a separate investment committee. Trustees "do attend as observers, so effectively they are members, because we very rarely vote," Mr. Brown explained. Instead, the committee operates by consensus.

    At the 900 million Vauxhall Motors, the Luton-based subsidiary of General Motors Corp., the investment function is entirely delegated to a separate entity, GM Investment Trustees Ltd., which has the responsibility for asset allocation and hiring external managers.

    With the pension proposal as discussed, Vauxhall probably won't have to make any changes in its trustee structure, said Dennis Sheehan, treasurer. "I don't see (member trustees) being a problem."

    Even where trustees do have a larger say over investment matters, they tend to follow the wisdom of those with investment experience on the board, several experts said. Participant trustees "tend to defer on investment issues," said Tony Thurnham, a partner with the law firm of Linklater & Paines, London, who advises a number of pension boards.

    Virtually all interviewed said participant trustees have proven themselves to be diligent students and hard workers, and some praised the questions they raise at trustee meetings.

    Participant trustees "have proved particularly willing to ask questions of investment advisers," said Tate & Lyle's Mr. White. Plus, they "demand a reply in terms they understand," he added. "That of course clarifies the issue for everybody."

    Pension plans' maturation

    Now, with the U.K. government planning adoption of minimum solvency rules and pension managers becoming more aware of their plans' growing maturity, British pension funds may seek more conservative investment postures anyway.

    The 1.5 billion J. Sainsbury PLC Pension & Death Benefit Scheme, London, is awaiting the results of an asset-liability study that is due in January that might lead to changes in the fund's investment approach, said Geoff Pearson, pensions manager. A lower equity exposure is possible.

    Now, the fund has 70% of assets invested in a balanced portfolio with Mercury Asset Management, while the remainder is in three specialized stock portfolios and real estate.

    The focus on trustees' duties is heightening their awareness of their responsibility for investment matters.

    "It will be interesting to see whether the employee trustees are more conservative or not," Mr. Pearson said.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    China: the outlook is bright for longer-term investors
    Finding Differentiation in Securitized Assets
    Green and sustainable bonds in emerging markets
    Portfolio Protection: One Size Fits None
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    April 5, 2021 Page One

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center