To comply with the principles of investment set out in the code, funds would have to:
- set overall investment objectives,
- ensure that those taking investment decisions have the skill to do so, and
- agree clear mandates with fund managers, including the timescale over which their performance would be measured.
Fund managers who take an alternative approach will have to provide an explanation.
The principles are designed round out the Minimum Funding Requirement (MFR), which aims to ensure pension funds can meet their obligations by requiring them to discount assets at the same interest rate as those of benchmark gilts. Many argue that the MFR has resulted in under-funding, and a narrow range of investment options for funds, something that the review aims to remedy.
The government also plans to introduce legislation making pension fund trustees more active as shareholders in UK companies, where it is in the interests of beneficiaries, while Myners recommended that a version of ERISA be incorporated into UK law.