REIGATE, England — U.K. pension plans need a governance face lift to make greater use of derivatives and alternative asset classes, according to consultants at Watson Wyatt Worldwide, Reigate.
Currently, U.K. pension plans are run by a board of trustees, half of whom are participant representatives. The board is responsible for management and overall policy of the pension plan using a very limited staff.
This model has encouraged U.K. pension plans to avoid decision-making in complex investment areas where member trustees do not have expertise, according to Roger Urwin, global head of investment consulting at Watson Wyatt.
Nick Watts, European head of investment consulting, said trustees should delegate day-to-day decisions and money manager monitoring to an internal management team backed by the plan sponsor's treasury operations or to external advisers. Trustees, in turn, should focus more on overall strategy and policy.