Wednesday, 21 March 2007, 12:00AM

Redesigning financial regulation of pensions and other retail products

Professor Avinash Persaud

Worried about your pension? Worried about the nation's poor savings habits or failing pension funds? In his next Gresham Lecture on Wednesday 21 March at 6pm, Professor Avinash Persaud will consider pensions and propose 'Redesigning Financial Regulation' to better suit pensioners, savers and investors.

One of the reasons why people feel more insecure today, despite generally rising incomes and near full employment, is that the idea of long employment with a single employer, followed by a decent pension, has been lost to the past. Employment and pensions have become portable and disconnected. Picking the right retirement, pension and savings arrangements have become critical decisions.

In this new world the appropriate regulation of pensions is important. However, it is Persaud's contention that the regulation has been misguided and has led to individuals bearing more risks in mechanisms that encourage the wrong management of risks.

Today, regulation is leading companies to push employees off old-fashioned defined benefit pension plans that clearly defined the retirement benefit they would receive, on to defined contribution plans which merely define how much money they put in every year.

In a defined contribution pension scheme, a 60 year old teacher looking to his or her 'low risk, tracker fund' could end up with an income for the rest of their life that is 20% higher or lower than expected just a year previously. Today a young pension scheme investing in a host of investments that give a superior return if held for a long time can be forced out early, with return penalties, by rules on how pension funds value their assets on a daily basis.

In this Gresham Lecture, Persaud considers where we have reached in pension fund arrangements and regulation today, and proposes where we should be instead.

professor-avinash-persaud

Avinash Persaud is the founder and Chairman of Intelligence Capital. Prior to founding Intelligence Capital and the GAM Persaud Investment Funds, he was Head of Global Research at State Street Corporation. Previously, he was Global Head of Currency and Commodity Research at JP Morgan. He held the Mercers' Memorial Chair in Commerce at Gresham College between 2002 and 2005, is a Governor of the London School of Economics and a Trustee, a member of the Board of the Global Association of Risk Professionals and the Chair of the CBC Working Group on investment flows. He is the winner of the Institute of International Finance's Jacques de Larosiere Award in Global Finance and an Amex Bank Award as well as a prolific author.

All of Professor Persaud's previous lectures may be accessed here.

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21 March 2007

Redesigning financial regulation of pensions and other retail products
Professor Avinash Persaud

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