Page 11 - Group Insurance and Retirement Benefit IC 83 E- Book

freely from one investment manager to another, though there may be some costs incurred

when this is done.

2. Occupational Pension Schemes
In occupational pension schemes, the trustee is always responsible for the investment of

the pension scheme moneys. Although it was always accepted that this was the case, the
Pensions Act 1990 specifically mentions this as a responsibility of the trustees. How this

actually works in practice depends on the nature and size of the scheme concerned.

Who Does the Investing?

Although the trustee is responsible for the investment of pension scheme moneys, they

rarely perform this duty themselves. In practice, most trust deeds give the trustees some
discretion to delegate the conduct of the investment to an investment manager and the

choice of manager will, again, depend on the nature and size of the scheme concerned.

Why is Investment so Important?

There are two basic types of pension scheme – defined benefit and defined contribution.

In a defined benefit scheme, the employer has promised a given level of benefit. If the
investments do not perform well, the money to meet these benefits has to be made up

somewhere, and this usually takes the form in an increased contribution from the
employer. Therefore, the employer is particularly interested in the success of the pension

scheme‘s investment policy.

The second kind of scheme is a defined contribution scheme. The benefits to be provided

under a scheme of this type depend solely on the amount of money available when a
person comes to retire, leaves service, or dies. If the investment policy followed by the

trustees is not successful, this will mean that the member gets less by way of benefits

than he/she might have hoped or expected. In this kind of scheme, therefore, the member
is vitally interested in the performance of the investments.