Sir, Private sector schemes now effectively provide inflation-proofed pensions. Although there are caps on the level of inflation-proofing required, in today’s low inflation environment those caps do not bite, and the cost of the schemes has risen accordingly – one of the many reasons contributing to the number of pension schemes recording a deficit (“FTSE 100 pension schemes fall to record deficit”, August 5).
I agree wholeheartedly with Bob Scott’s comment about the need for companies to work with trustees. However, I would go one step further and argue for the need for independent trustees.
Pension fund deficits have understandably caused dissent in trustee boardrooms, with member trustees arguing that a promise is a promise, and the company trustees concentrating on the cost of meeting that promise. In addition, the trustees are tasked with ensuring the funds of pension schemes are sensibly invested, but the more conservative the investments, the higher the contributions required from the company. While trustees try to manage their conflicts, it is very difficult for them to be truly objective.
It is time that all corporate pension schemes appointed more independent trustees both to safeguard the interests of members and to ensure greater transparency and confidence in the trustees’ decision-making process.
London EC3, UK
This letter was originally published in the Financial Times, 12th August 2009.