Dear Father Christmas – A Wish List for 2011

 ‘Twas the night before tri-annual funding, and all through portfolio, not an asset was falling…but then I woke up!

Father Christmas, I wish for many things in my stocking this year: higher yields, lower inflation, rising markets and stronger sponsors.  But in the meantime, this Christmas, I’m asking for: new investment opportunities, a better understanding among ourselves of why we should all save for retirement as well as an industry that embraces a new era of collaboration and communication.

Pension Funds – Social Capitalists

The financial crisis brought with it the need for new sources of long-term funding. The new age of austerity has inadvertently created countless win-win opportunities for long-term investors and those that requiring funding. Because their liabilities are long-term, pension funds are ideally suited for accessing significant illiquidity premia. They can provide patient long-term capital for a huge variety of undertakings. They can fund roads, railways, ports, hospitals, social housing, clean energy and many other projects that bring huge benefits to society.

Pension funds can not only earn handsome and secure returns this way. Society as a whole profits when money is readily available for such projects. If only they find the courage and vision, pension funds can be social capitalists – combing profit and general welfare.

Communication – Making Informed Decision

There is a lack of communication between the pension industry and the wider population.  Most members of Generation Y have a rather relaxed attitude to pensions. Their motto is: spend today and save tomorrow. They will only put something into their pension pots if some money happens to be left by the end of the month. Even those who save money month in, month out are more likely to aim for the new golf clubs or the funky holiday getaway than a decent pension.

The chance that this behaviour will secure you a comfortable retirement is just as high as the success chances of England’s recent World Cup bid. Bad preparation cannot be made good by some showy performance right at the end – and we shouldn’t hope for a royal prince, the prime minister or David Beckham being there to help us sort out our pensions. People on the street need to understand how important it is to save for retirement. And this is much more challenging to get across than explaining how to set up the monthly withdrawal from their bank accounts.

Collaboration – Getting Everybody Onboard

The pensions industry is in desperate need of more and better collaboration.  Even with the rise of technology, social media and flashy gadgets like the iPhone I’ve noticed that the pensions industry remains unconnected.  Trustees tell me they want access to their peers and experts, while actuaries tell me they wish they had a forum to facilitate engagement.  We need to bring together all the people that make up the industry: trustees, sponsor, industry experts, academics, investment consultants, actuaries, lawyers, bankers, asset managers to name but a few. Only through wide-ranging and honest dialogue and debate in 2011 will we be able to find the most creative, innovative and robust solutions for both legacy DB and newer DC schemes.

So Father Christmas, can you help fill everyone’s stockings this year?  Happy New Year!

Rob