What is the biggest challenge facing the pensions industry? Ask those involved in this business and one answer comes back time and again: our ageing population.
As a result any talk of "sustainable pensions" tends to focus solely on the task of ensuring there is enough money in the pension pot to produce an adequate income for today's workers, who may live well into their 90s, or beyond.
This challenge can look particularly knotty when you factor in a shrinking workforce, a disengagement with saving, the rising cost of public sector pensions and an economic environment of lower investment returns.
But there are a number of voices suggesting that this demographic timebomb shouldn't be looked at in isolation. If it is to be defused more attention needs to be given to how pension funds generate their returns, and what kind of future this is building.
Christine Berry, the head of policy at ShareAction says: "All the focus seems to be on encouraging consumers to save more or reducing fees and charges." She said that while these initiatives were to be welcomed, they didn't address the central problem that projected returns are "predicated on the assumption that the economy will continue to grow from using what are essentially finite resources."
To date, much of the debate around the issues of sustainable finance, stewardship and resources has been seen as a fringe issue for the pensions industry; either tackled by a clique of interested parties, or a small team that is hived off in "some separate side-office" at a major pension consultancy or investment firm.
Evidence of this can be seen in a snapshot survey recently undertaken by the Institute and Faculty of Actuaries, and shared exclusively with Guardian Sustainable Business.
It asked members what they considered to be the main challenges facing pension funds over the medium to long term. Only one firm out of the 10 that responded explicitly mentioned low growth as a result of "restricted or depleted resources".
This would indicate that such factors aren't widely taken into account when modelling future pension returns.
The role of the actuary isn't to act as a fortune teller and divine what investments will deliver the best return in future, nor how long people will continue to draw a pension. Instead, actuaries map a range of future scenarios, based on a wide range of statistics, from ONS data on longevity, to the projected price of gilts and interest rates. These models enable asset owners and investment managers to adopt appropriate investment strategies.
But is it time to make "resource constraint" a key factor when looking at longer-term returns? One group of actuaries certainly thinks so. Their report, Resource Constraints: Sharing a Finite World was published at the start of this year and makes for some disarming reading.
The report, jointly published by the Actuarial Profession and Anglia Ruskin University, concluded: "The evidence of resource constraint is strong... [This] will, at best, increase energy and commodity prices over the next century and, at worse, trigger a long-term decline in the global economy."
When such factors were modelled into pension projections, the report concluded that in the most negative scenarios the value of a pension at retirement could effectively halve compared to its current valuation, while healthy defined benefit schemes would be insolvent within 35 years.
As a result, these actuaries said the pension industry "urgently needs to understand the implication of this for their advice, assumptions and models." This is why activists like ShareWatch argue that sustainable investment needs to be central if pension funds are to maintain returns and support an ageing population – that in itself is consuming more resources.
Are there signs that this is changing? One insider, who asked not to be named, said it was still "early days" for this work on limits to growth to be assimilated in the wider market. But the fact that it is being picked up by campaigners within the financial services sector suggests that the debate was shifting. Interestingly, the snapshot survey showed that lower investment returns was a key long-term concern – although few identified any specific cause for this.
The National Association of Pension Funds, which represents some of the biggest company pension funds has also said that there is evidence that more schemes are looking at environmental factors when making investment decisions. Next week it is publishing its latest Engagement Survey – an annual survey of pension scheme members with more than £1bn in assets. This shows that 81% of these schemes agree that "extra-financial" factors, such as environmental, social and governance issues – can have a material impact on investments over the longer term.
In it's recent Responsible Investment guide the NAPF said: "Pension fund beneficiaries want to retire with a good pension and into a world characterised by a healthy environment, vibrant economy and peaceful society. The assets pension funds own and have oversight of can play an important role in determining the future society member's face, and thus, the real value of their retirement income."
But pressure groups say that sentiments like this are not yet being reflected at the coalface of pension planning. One of the criticisms levelled at the financial industry is that it is too focused on short-term returns. The pensions industry is looking at the long term when it comes to the issue of demographics. As Nick Salter, president elect of the Institute and Faculty of Actuaries recently pointed out, "building sustainable pensions for today's workers means looking beyond 20- or 30-year time horizons".
The challenge for those taking this longer-term perspective is to ensure they aren't taking a blinkered view, and are blinded to the more significant dangers looming. If they can't see the cause of some of these problems, then they are unlikely to solve them.
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