A review of the Pension Protection Fund, London, recommended that the lifeboat plan share its successes, knowledge and good practice more widely — particularly when it comes to alternatives and responsible investment.
The departmental review was sponsored by the Department for Work and Pensions.
Independent lead reviewer Lesley Titcomb said in a summary of her findings that the PPF could look "to play a greater leadership role in the U.K. investment industry by working with others to encourage the development of appropriately structured alternative investment opportunities in, for example, U.K. infrastructure."
The lifeboat fund for the pension plans of insolvent U.K. companies should take a higher public profile and share more information on its approach to investment management, potentially including more information in its annual report "to provide insight into specific investment choices," Ms. Titcomb said. The fund should also use its position as a public entity to encourage the development of more U.K.-focused well-structured alternative investment opportunities, she said.
Another recommendation is for the PPF's board to consider the appointment of an independent review of its investment approach. Ms. Titcomb noted that the PPF is set to agree and publish its new funding strategy, making the next review of its statement of investment principles and its strategic asset allocation "particularly significant."
An independent review of its investment approach "would provide strong, independent assurance to the board and other stakeholders from a fresh pair of eyes that the investment approach is the right one going forward to support the revised funding objective(s) and that the strategic asset allocation reflects this," Ms. Titcomb said.
The PPF, which has about £39 billion ($47.3 billion) in assets, had a strategic asset allocation of 41.5% return-seeking assets; 40% liability-hedging assets; 12.5% hybrid assets; and 6% cash as of September 2021.
A further recommendation was that the PPF's board and executives should consider whether applying for authorization and regulation from the Financial Conduct Authority — either for the PPF itself or a dedicated subsidiary — would be appropriate.
The recommendation was made "given the increased significance of the investment management function" at the PPF. The PPF is "carrying out activities which in other organizations are deemed to fall within the scope of financial services regulation. It is also possible that if consideration were to be given to the PPF taking on other responsibilities, then the question of whether it should be subject to financial regulation may arise again," the review said.
A number of internal interviews were conducted as part of the review, with differing opinions on the recommendation regarding FCA authorization. Some felt gaining authorization and regulation by the FCA would be advantageous to the PPF, also making it more attractive as an employer; while others said it would create "a great deal of extra work."
The review added that "the PPF needs to resolve its position on this point within the near future."
The review was carried out in the first quarter of the year and considered the "form and function" of the PPF in terms of whether it is fulfilling the purpose and objectives for which it was formed in 2005, and whether it is still required.
Ms. Titcomb added that she "found the PPF to be a well-run public body offering high standards of service and value for money to those who use it and pay for it." She also noted that her "recommendations are therefore limited in number, focusing on areas where there is an opportunity to enhance rather than a need to rectify."
A PPF spokeswoman said: "We are pleased that DWP's review of the PPF has now been published and its recommendations align closely with our strategic priorities. We look forward to communicating more around the specific points raised in the New Year."
