New chairman Ruston Smith’s inaugural speech at the United Kingdom’s National Association of Pension Fund annual conference in Manchester focused on building trust in the pensions industry. Talking about the need to create “pensions people trust to deliver a decent income, pensions people trust to be there when they retire and pensions people trust not to rip them off”, he set out the main themes that will govern his two-year tenure at the organisation that represents 1300 pension schemes with a combined £900 billion ($1.46 trillion) under management.
As auto-enrolment promises to see between 6 to 9 million people start to save for the first time, so Smith’s focus will be on improving governance and regulation to protect savers, maximise retirement incomes and nurture confidence in pension saving. He promised more emphasis at NAPF on defined contribution, “the future of pension’s provision”, and more support with investment strategies and regulation.
In what he called “building on today for a better tomorrow”, Smith, who replaces outgoing chairman and former Barclays pension chief Mark Hyde Harrison, set out four “big steps” that the industry needs to take in order to adapt to the challenges of auto-enrolment, whereby every company in the UK will be obliged to offer all staff a pension. Staff will be automatically enrolled unless they opt out.
Quality mark
Firstly, he asks the industry to encourage savers by increasing awareness of the NAPF’s Pension Quality Mark, a tool to help people recognise more easily what quality schemes look like. Smith called to make pensions simpler by “junking the jargon” and encouraging “simple conversations” about them. Adding in a third point: “We need to develop more innovative and creative products and services to recognise pension savers’ changing needs, particularly at retirement. We need to recognise the need for products that reflect people’s retirement choices and life patterns when they get older. Linked to this, we need a more flexible pensions framework for individuals and employers. People’s lives and expectations have changed. So we need to face into that challenge together,” he said.
Smith also talked about the need to build confidence in saving to overcome pension apathy and cynicism. “This means we need trusted institutions. And it means we need to tackle the difficult questions and vested interests so that saving for retirement is something that works in the interests of the saver – and not against it.”
Top-shelf issues
An industry heavyweight, Smith joins the NAPF from his role as pensions director at Tesco since 2002. The retailer’s $11-billion defined benefit scheme has 300,000 members and is internally managed by Tesco Pension Investment, where strategy is headed up by Steven Daniels, the former chief investment officer at Liverpool Victoria, an insurance company. Smith has held a non-executive role at NAPF since 2007 and lobbied on behalf of the industry earlier this year when he represented the NAPF at a Parliamentary Treasury Select Committee. Together with other experts, he argued how quantitative easing has affected pension fund investments and liabilities.
In a wide-ranging speech, Smith also looked beyond the next two years, talking about the need for a vision for the next decade. He pointed out that an ageing population and the country’s future economic needs pose challenges that extend beyond pensions to questions that “we haven’t even started thinking about as a nation, never mind tackling”. He also asked how best to create more employment opportunities for older generations when youth unemployment is now running at 20 per cent.
Smith’s new tenure promises a fresh set of priorities or “step change” at the organisation, which he is determined to ensure continues to serve its members. “Having worked in retail for the last decade, I believe the customer is at the heart of everything we do,” he said referring to the gathered delegates as his customers. “For me, this will be no different at the NAPF.”
