Brown accepts Myners recommendations

In his budget yesterday, the British Chancellor gave his response to The Myners Review, which recommends changes in institutional investment.

British Chancellor of the Exchequer Gordon Brown yesterday accepted all of the recommendations put forward in Paul Myners’ review of institutional investment.

Myners had recommended that institutions should:

  • Adopt disciplines conducive to effective decision-making
  • Pursue an unequivocal investment objective with an explicit focus on asset allocation
  • Encourage greater competition amongst providers of actuarial services and investment advice
  • Actively intervene in companies they are invested in select benchmarks in line with investment objectives and corresponding strategies
  • Boost transparency and improve procedures on performance measurement and reporting
  • The budget report said that the principles put forward were correct and “pension funds and in due course other institutions should set out publicly where they do not comply with any of these and why. The Government is willing to legislate if necessary to ensure that this happens.”

    The minimum funding requirement is to be abolished and it will be replaced by a long-term scheme-specific approach based on transparency, the Chancellor said. Protective measures will be introduced including a statutory duty of care for actuaries of pension schemes, stricter rules on voluntary wind-up and extension of compensation for fraud.

    Myners also proposed a legal change to investment restrictions on pension funds, which would make it easier for them to invest in limited partnerships. Brown said the Government would consult on abolishing the 20-partner limit for limited partnerships, and would remove the requirement for pension funds to invest in limited partnerships through an FSA-authorised person. It will commission an independent review of capital and information flows around personal investment products.

    The Government also intends to draw on a number of points from consultation responses including, in particular, useful suggestions from the National Association of Pension Funds.

    In two years time the Government plans to assess the effectiveness of the principles recommended by Myners. If institutions have not complied with the recommendations it is likely that legislation will be introduced at that time.