Myners Report: 10 Years On

Last week the Financial Times ran a number of articles on the anniversary of the Myners Report which was published in March 2001. This report was written by Paul Myners, former fund manager, Chair of Marks & Spencer and of course, a Labour finance minister in the last government.

In 2000 Myner was asked to review institutional investments and whether investors were acting in the best interests of beneficiaries.  The poacher turned gamekeeper concluded they did not and made a number of recommendations.

I was quoted here in the article here about the role of auditors and my view that there had been despite Myners a "spectacular failure" by asset owners to stop the Banking crisis.  This was due (in part) to scheme fiduciaries not acting as owners of capital. 

While Myner’s report helped turn me from being a trade union observer on my pension scheme investment panel in 1996 (with no formal speaking rights -I did of course speak, no rights to attend all meetings, to question or to receive information) to being a full voting member of an investment committee. However, this is nowhere near enough.

The banking crisis showed that there is still grossly insufficient governance. Owners of capital (pension and insurance funds) failed to take their responsibilities of ownership seriously and allowed their money to be squandered and even stolen by the managers they paid to be “on watch” and look after their assets. How ridiculous that we continue to allow this? Not only did we lose big chunks of our savings but as taxpayers we then had to bail the banks out and are now suffering huge cuts in basic public services to pay for it.

The dangers of ownerless assets is well known, even Adam Smith warned about this over 200 years ago.  Part of the solution is that trustees and representatives should undertake an in depth management and scrutiny role with our funds.  I compared the role of pension trustees with that of scrutiny panels in local councils, who meet monthly, go on visits, have specialist staff tasked to support them, co-op experts to assist and can call witnesses to be questioned about their performance.

I also gave a plug in the interview to the  Association of Member Nominated Trustees (AMNT) which I think will play an important role in better governance.

The FT concluded with a quote from Paul “You don’t wash or service a rented car because you expect to give it back. I still get the impression that shareholders treat their holdings like a rented car. For the efficient use of capital, that attitude has to change.”

"Going Dutch – how to double the value of British pensions"

Hat tip Touchstone by TUC Nigel Stanley "Earlier today I spoke at the launch of  Going Dutch – how to double the value of British pensions.  This is a new report by David Pitt-Watson for the RSA that argues that the UK’s DC pensions could deliver much better pensions for the same contributions.
It’s an exemplary report - succint, well-written and carefully argued. I would urge anyone with a passing interest in pensions policy to read it.
The report argues that the DC schemes in which most people with pensions now save are extremely inefficient. There are two main areas of potential gain.

• Making schemes much bigger and ensuring that they are run by trustees in the interests of their members can deliver one lot of savings. Charges dramatically eat up investment gains – up to 40 per cent of potential pension – and if you can reduce charges through efficient management and economies of scale then you can deliver seriously better pensions for the same contributions.
• Making DC schemes collective so that members pool their resources and share risk can deliver a further increase in benefits. This would mean schemes provising their own pensions rather than compelling people to buy annuities....."