For Professional Clients Only

Regulation: help at hand for pension trustees

  • Alex Pollak

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

At BlackRock we know pension regulation and trustee education are crucial. Pension trustees play a big role in the later-life hopes and dreams of millions of people who can only have the retirement they hope for if their pensions perform as expected.

By its nature, pension regulation is complex. Keeping on top of it can be tricky and it’s unlikely to get easier. The pensions landscape is ever-changing, and trustees must engage with reams of new legislation and put it into practice.

One of the biggest issues at the moment is the requirement for trustees to weigh Environmental, Social and Governance (ESG) considerations more precisely. Trustees must also deal with changes between the use of the Retail Price Index (RPI) and the Consumer Price Index (CPI) when determining inflation-proofing requirements.

On top of this comes volatility, which is a particular issue at the moment. Trustees need to act fast, keeping within their regulatory framework and parameters, to secure the best outcome for their clients. And they need to keep up with the training side of things, too, to ensure they prepare for what’s coming next.

It’s a big ask at a tricky time, which is perhaps partly why we’re seeing so much interest in our fiduciary management service at the moment. For hard-pressed trustees, it has a lot going for it, including help from our Public Policy team, which has been running for more than a decade.

The team has a dual role: advocating for public policies that are in our clients’ best interests; and identifying the most prominent legislative and regulatory priorities affecting the pensions market. This helps our clients to manage not only near-term challenges, but also to prepare for the future. It gives us, and through us our clients, a seat at the table when regulatory changes are made.

Risk: There is no guarantee that research capabilities will contribute to a positive investment outcome.

Our team helps trustees to comply with the latest regulations as well. Implementing the new rules around ESG in a way that is consistent with a pension scheme’s beliefs is a daunting task, but our tools – including the proprietary Aladdin system, our end-to-end portfolio management software – can analyse huge amounts of data and ensure compliance.

Risk: While proprietary technology platforms may help manage risk, risk cannot be eliminated.

As well as dealing with the regulation, our team takes the strain in other ways. At present, difficult investment decisions sometimes need to be taken fast, to ensure pension schemes remain on course in turbulent waters. As we head into a bumpy winter of daily case counts and frequent changes to lockdown rules, it looks like volatility won’t be going away soon.

Any ship’s captain knows that having the right levers at their fingertips and a capable navigation team can make the difference between a successful crossing and an SOS call out. Our fiduciary management team aims to provide that much needed support, in the form of a transparent partnership that is nimble, flexible and adaptive to market changes.

We help trustees to support scheme members until the last pension is paid. It takes the pressure off. And goodness knows, we need a bit of that at the moment.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed from BlackRock are as of September 2020 and may change as subsequent conditions vary.