What earns you trust?
Editorial: Gloomy predictions led to a sliding pound ahead of Prime Minister Theresa May’s speech on Brexit last week, but instead her assertions meant that sterling rose, bringing some hope to currency markets (and those of us who are looking to travel this year).
Giving certainty to business and the public sector is May’s declared top priority for the entire Brexit process, and pension funds should take comfort from this; their sponsor covenant will depend on it, as our article explains.
The value of sterling is an important factor in the covenant equation. Sterling’s moves – some have compared its behaviour to that of an emerging market currency – will of course also have an effect on pension fund investments and liabilities. Inflation is already starting to bite.
Illustration by Ben Jennings
But as the consumer price index creeps up, experts have pointed out that long-term inflation looks a lot less dramatic than the latest figures.
In our piece on inflation, those we spoke with reminded trustees to focus on the longer term, the same mantra that had accompanied the result of the June referendum, and noted that current figures do not indicate a need to hedge inflation any more than interest rates.
As unprecedented political events influence markets and higher governance standards put pressure on trustee boards, many are turning to professional trustees to help guide their fund without crossing any red lines.
The difficulty of course lies in finding the right trustee: how can non-professionals tell if a professional trustee will deliver on the promise of higher standards? Our analysis article examines more closely what schemes might want to look for in a professional trustee and outlines the two polar positions in the industry about the need, or not, for a qualification.
Much might be down to how much the appointed individual is trusted because of their track record in reaching goals and staying on the right side of rules and regulations. The same goes for politicians. Whether May and her entourage can inspire trust in the British public and MPs, and crucially, key European figures, will be one of the factors influencing our future, and it needs to happen through actions as well as words.
Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.