"Too late" for Government action in respect of DB schemes

LONDON, November 7, 2007 — Nearly half of delegates attending the 2007 Pension Summit said that it is now "too late when it comes to the UK Government encouraging employers to maintain their defined benefit (DB)/final salary schemes.

Forty six per cent of delegates attending the event — organised by BNY Mellon Asset Servicing and ABN AMRO Mellon Global Securities Services B.V. and attended by representatives from 70 leading UK pension schemes — believe that the shift away from DB schemes is irreversible.

A further three per cent answered that there was 'nothing' the Government could do. Of the remaining delegates, 25 per cent said the answer lay in deregulation and the other 25 per cent opted for less government intervention.

Seventy three per cent of the 120-strong audience also agreed that it is getting harder to find and retain trustees. Forty per cent already had an independent trustee on their board, the survey showed.

The audience was split on the subject of Personal Accounts. While forty six per cent agreed that Personal Accounts will lead to a 'levelling down' of their company schemes, 54 per cent disagreed. Of those that agreed, 33 per cent of delegates felt the 'levelling down' process would occur within the next five years; another 33 per cent said it would occur within 10 years; 10 per cent said the timeframe would be eight years.

As for the use of alternative investment classes by pensions schemes, 83 per cent of delegates said that 4 per cent or higher of their portfolio was allocated to these instruments. Property-based instruments were the most widely used (55 per cent of delegates), followed by derivatives products (21 per cent) and private equity (12 per cent).

Seventy four per cent of delegates said they were either definitely (33 per cent) or contemplating (41 per cent) increasing their exposure to alternatives in the next 12 months.

Nigel Taylorson, Head of Pensions, UK & Ireland at ABN AMRO Mellon, said: "This survey, based on direct input from major UK pension funds and their trustees, confirms that life in the pensions sector is today far more complex and challenging than was the case a decade, or indeed even five years, ago. The role that asset servicing providers have to play in partnering with and advising schemes, their trustees and managers has accordingly never been more important. "

Mark Bewick, Relationship Management, UK Pensions at BNY Mellon Asset Servicing, added: "Whilst our audience see DB schemes as having a limited life expectancy — reflecting a recent poll undertaken by the NAPF — there is no doubt that the industry would seize any lifeline to save such schemes, were one to materialise, as DB is still seen as a far better solution to pensioners' long-term needs than DC."

The Pensions Summit, held at the Royal Society of Arts, London on November 1, 2007 and chaired by Anthony Hilton, Financial Editor at the London Evening Standard, included presentations by Chris Lewin, who headed the recent Deregulatory Review of Private Pensions on behalf of the Department of Work and Pensions (DWP); Chris Hitchen, Chairman of the National Association of Pension Funds; and Chris Dobson, Head of Personal Account, Financial & Investment at the DWP.

ABN AMRO Mellon Global Securities Services B.V. is a 50-50 joint venture between ABN AMRO Bank N.V. and Mellon Bank, N.A. It provides global custody and related services to institutions around the world outside North America. The company combines ABN AMRO's worldwide servicing presence with Mellon's advanced technology and product capabilities. Value-added products and services include compliance monitoring, investment accounting, performance measurement and analytics. News and other information about ABN AMRO Mellon Global Securities Services are available at www.abnamromellon.com.

BNY Mellon Asset Servicing offers clients worldwide a broad spectrum of specialised asset servicing capabilities, including custody and fund services, securities lending, performance and analytics, and execution services. BNY Mellon Asset Servicing provides services through The Bank of New York, Mellon Bank, N.A. and other related companies.

The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has more than $20 trillion in assets under custody and administration, more than $1.1 trillion in assets under management and services $11 trillion in outstanding debt. Additional information is available at bnymellon.com.