The Pensions Regulator

IGG background

The Myners principles

The Myners principles codify best practice in investment decision-making. While they are voluntary, pension fund trustees are expected to consider their applicability to their own fund and report on a 'comply or explain' basis how they have used them.

The principles were announced in 2002 following a review of institutional investment by Paul Myners, which found shortcomings in the expertise and organisation of investment decision-making by pension fund trustees.

In 2004 the Government conducted a review of the operation of the principles. This review indicated that they have contributed to an improvement in trustee performance, albeit with more progress in some areas (eg trustee expertise and training), than others (eg more detailed consideration of investment time horizons and shareholder engagement).

Against this background, in 2007 the Government asked the National Association of Pension Funds (NAPF) to assess the extent to which pension fund trustees are applying the principles; the extent to which scheme governance and the quality of trusteeship have improved; and whether key gaps identified in the 2004 review had been addressed.

In January 2007 NAPF published a discussion paper 'Institutional Investment in the UK: six years on', which records the significant changes that have taken place since Paul Myners first undertook his review and, on the basis of evidence then available, provided an initial assessment of progress by pension funds in complying with the principles.

Review findings

In light of evidence gathered (through a number of sources including responses to the discussion paper), the NAPF's report confirmed that the Myners principles were well supported and represented a clear and coherent approach to investment decision-making.

The review found that the greatest progress had been made in:

• improving trustee knowledge and understanding;
• strategic asset allocation;
• utilising expert advice;
• adopting appropriate benchmarks, transparency and reporting; and
• for larger schemes, activism and engagement.

It also identified areas in which further work was desirable, for example in trustees' self-assessment of their own performance and improving the utility of the principles for smaller schemes. The Government accepted the NAPF's principal findings and recommendations.

In particular, it agreed that the principles would be more effective if Government and industry developed them to be more flexible and high-level whilst still voluntary, than in prescribing how pension funds should manage specific aspects of their business.

New framework

In March 2008 the Government consulted on proposals to update the Myners principles and establish a new industry-led framework for the application of the principles.

Respondents presented a range of views and opinions on the questions raised in the consultation document. The Government published its response: 'Updating the Myners principles: a response to consultation'.

This explains how the responses have informed the Government's view and has helped to create a joint government/industry steering grouped tasked with responsible ownership of updated principles and development of principles for specific pension arrangements.