The managing director of consulting and advisory firm Russell Investments, Ms. Sorca Kelly-Scholte has accused the lobbying cartel of life companies, investment managers and banks for creating hurdles to UK pension reforms.
Making the strong observations on a submission for evidence to Workplace Retirement Income Commission, she complained that pension savers are getting a raw deal from pension providers.
She strongly advocated for a consumer voice headed by employers and added that efforts should be made to develop collective defined benefit schemes.
In her submission to the consultation ‘Fairness and Efficiency – A National Perspective on Pensions’, she made a scathing attack saying expediency and sectional interests have distorted pensions policy for too long and fairness and efficiency were missing from development of national pension policy.
“Real need for changes to the UK pensions system”, but vested interests had historically been “extremely successful in lobbying government and in articulating pension issues through the prism of their own sales models”, she observed.
Accusing the traditional investment managers, investment banks and life companies of being self-serving, her report said: “A weakened occupational sector, largely withdrawn from defined benefit plans, has not succeeded in making its own voice heard as a committed consumer advocate. If we are to have a healthy occupational pension system, it is necessary to rebuild the commitment of companies to the pension project”.
Since defined benefit schemes were replaced by defined contribution schemes, most funds have become ‘ridiculously small’, resulting in high costs. Pension products have also become too complicated for the average consumer, she observed.
She argued for reintroduction of risk-sharing which will enable pension funds to take long-term positions and allow them to invest in the more volatile but rewarding equity segment. Since risk-sharing has declined, returns on investment have fallen drastically, she observed. She advocated for a stronger consumer voice and urged the employers to take on the role to ensure that savers got a bigger slice of the pensions cake.
“This means introducing some DB-like collectivism into DC. It could also mean reversing some of the destructive prescriptions that have led companies to abandon DB. In a variety of ways, the cake could be bigger”, she said.