TPR Fines Trustees for Not Investing Savings Promptly

The Pensions Regulator (TPR), the UK’s watchdog for workplace pensions, has fined four trustees of a master trust for failing to promptly invest £1.4 million ($1.8 million) of its members’ savings for three years, affecting 9,081 plan participants

TRP fined the trustees of Salvus Master Trust a total of £5,000 for the problem—the maximum fine that could have been imposed.

“Pension schemes must collect and invest the contributions made by employers and employees,” Nicola Parish, executive director of frontline regulation at TPR, said in a release. “To have left so much money uninvested for this period of time is clearly unacceptable.”

In the UK, pension trustees are required by law to process and invest contributions from employers promptly and accurately, according to TPR. Otherwise trustees are breaking regulation 24 of the Occupational Pension Schemes Regulations 1996. This was TPR’s first penalty issued following a breach of this rule.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

According to TPR’s regulatory intervention report, in January 2017 the trustees of Salvus Master Trust reported to TPR that there had been a failure to invest pension contributions received since 2014. Salvus blamed the problem on issues with its manual process for allocating contributions. The trustees also provided details of their plans to address both the failure to invest pension contributions, and ongoing administration problems with the pension.

TPR said the master trust cooperated with the regulator to address the problems, and to make sure all of the affected members were returned to the financial position they would have been in if the error had not occurred.

“Our engagement with Salvus has ensured that not only the thousands of members affected have not suffered any detriment, but also the master trust’s systems have been improved to stop this happening again,” said Parish.

In September 2017, TPR issued a penalty notice to the trustees of the plan who were active between April 6, 2015, when the regulation requiring trustees to process core financial transactions promptly and accurately came into force, and Oct. 17, 2016. TPR said it chose the timeframe because each penalized trustee had responsibility to comply with regulation 24 and took no action to rectify the breach.

New legislation for master trusts came into effect Oct. 1, which is intended to put safeguards on the plans to better protect members.

“Master trusts have to prove that they meet standards in five areas, including proving that they have adequate systems and processes,” said Parish. “We will continue to take tough action against schemes which do not meet their legal duties.”

Tags: Pension, Salvus Master Trust, The Pensions Regulator, UK

By 2025, institutional investors expect the investment landscape to change, with more artificial intelligence (AI) at the helm of this reshaping, despite the technology’s current lack of adoption.

According to Fidelity Institutional Asset Management, investors “appear to be at a crossroads” in determining the outcome of man versus machine, with a near split decision on whether their jobs will be replaced or improved.

The firm’s 2018 Global Institutional Survey said 53% of institutional investors think their roles will become mechanizedSet featured image, while 60% said the continued importance of the human connection will be valued as the technology becomes more integrated and expands upon their investing capabilities.

The survey polled 905 investors from 25 countries representing pension funds, financial institutions, and insurance companies with $29 trillion in combined assets under management. These investors are also predicting the continued rise of AI to bring quicker, more accurate, and more efficient markets and decision-making with it.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

About 62% of respondents expect new trading algorithms and quantitative models will add market efficiency, with 80% believing blockchain and similar technology will “fundamentally change the industry.”

As the advancements persist, so will reliance. A majority (69%) predict they will need AI for asset allocation optimization, while 67% feel they will need it for keeping track of manager evaluations, and the performance and risk of their portfolios. Roughly 40% said they could use it to create custom portfolios without any asset manager assistance.

Jeff Mitchell, chief investment officer, Fidelity Institutional Asset Management, said “expanding data sets, faster computing power, and smarter technologies” are bringing the industry shift closer. “As investing becomes more transparent and real time, the implications for asset allocation and portfolio construction will be profound,” he said.

While institutional investors are predicting AI to either take the reigns or do some of the heavy lifting in 2025, only 10% of respondents had fully integrated it into their investment processes. A Fidelity spokesperson told CIO that the 10% is part of the two-thirds “who have either fully integrated, are currently testing or are exploring its capabilities – which is encouraging.”

“It’s still early days when it comes to these emerging technologies,” Judy Marlinski, president of Fidelity Institutional Asset Management told CIO. “Some institutional investors may not yet have set aside the time to explore the potential of these technologies – but, not being prepared is not an excuse, so that’s why we want these findings to be a call to action for those that haven’t yet made it a priority.”

Tags: Artificial Intelligence, Fidelity Institutional Asset Management, Risk