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4 - Governance and accountability in UK pension schemes

Published online by Cambridge University Press:  05 April 2014

By
Alison Fox
Edited by
James P. Hawley ,
Andreas G. F. Hoepner ,
Keith L. Johnson ,
Joakim Sandberg  and
Edward J. Waitzer
Alison Fox
Affiliation:
University of Dundee
James P. Hawley
Affiliation:
St Mary's College, California
Andreas G. F. Hoepner
Affiliation:
ICMA Centre, Henley Business School, University of Reading
Keith L. Johnson
Affiliation:
University of Wisconsin, Madison
Joakim Sandberg
Affiliation:
University of Gothenburg
Edward J. Waitzer
Affiliation:
York University, Toronto
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Summary

Introduction

Relatively little is known about the governance of UK pension schemes (Epstein 1992; Clark 2004; Evans et al. 2008) except that they are administered by trustees who have a duty to act in good faith on behalf of their members. Such an admission is surprising since pension schemes play an important role within the UK economy. For example, in 1993 the Pension Law Review Committee (PLRC) suggested that “[f]or most people, their pension rights are likely to be one of the most valuable assets they have” (Pension Law Review Committee 1993: 358). UK pension schemes are also large institutional investors in the capital markets (Solomon 2007) and so their success is important to many companies that rely on them for funding. However, in January 2009, The National Association of Pension Funds (NAPF) reported that the UK faced the prospective closure of nearly 50 percent of existing defined benefit (DB) schemes over the next five years (National Association of Pension Funds 2009). By February 2010, only 23 percent of all UK pension schemes remained open to new members compared to 88 percent ten years ago (National Association of Pension Funds 2010). In February 2012, the UK’s Pension Protection Fund (PPF) reported that the aggregate deficit of the 6,432 schemes in its PPF 7800 index was £222.2 billion and that 81 percent of these schemes were in deficit (Pension Protection Fund 2010).

Type
Chapter
Information
Cambridge Handbook of Institutional Investment and Fiduciary Duty , pp. 31 - 45
Publisher: Cambridge University Press
Print publication year: 2014

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