2010 predictions for pensions policy

by Dr. Ros Altmann

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2010 is shaping up to be another turbulent year for pensions.

Artificially depressed interest rates and rising inflation will aggravate final salary scheme deficits and tensions between trustees and sponsors will rise. Schemes will continue to close to new accruals.

Trends towards increasingly liability-focussed investing and downside protection against volatility in both assets and liabilities will accelerate, requiring more specialist investment expertise.

Meanwhile, cost-cutting pressures will see employers cutting DC scheme contributions further – especially as the proposed 3% employer contributions into personal accounts tempt them to level down.

The personal accounts timetable will slip again as some of the practical problems become better understood and, if the Conservatives win the Election, they may put the whole initiative on hold.

They would probably also announce an independent inquiry into funding public sector pensions.