The Pensions Regulator’s Louise Davey, director of regulatory policy, analysis and advice warns trustees that they must not lose focus on protecting savers from economic volatility.
Davey said that while “equities have enjoyed a stronger year to date, bonds have continued to suffer in a climate of rising interest rates and high inflation”.
Davey was positive that trustees have acted on the regulator’s guidance for defined benefit schemes on managing risks in leveraged liability-driven investments. But she called for DC schemes to take heed of the watchdog’s guidance to protect savers who are close to retirement and could be impacted depending on the investment strategy of their scheme.
The blog post stressed trustees’ fiduciary duty and the need to continue to support savers in so-called ‘lifestyle’ funds, and to ensure investment strategies support stronger saver outcomes in the years to come. Davey stressed that older savers are being disproportionately impacted by the current economic environment.
Davey also highlighted the communication challenges that trustees may face, noting that trustees need to be mindful that early signs of economic recovery are “unlikely to be fully reflected in the annual benefits statements they will be sending to savers in the coming months” since they are, by their nature, retrospective. Davey called on schemes to provide more up-to-date context in annual statements and supporting materials, and for trustees to guard against the risks of savers making knee-jerk decisions which could harm their retirement plans.
You can read Davey’s full blog here.
