Treasury Riot Act over pensions

RUTH Kelly, financial secretary to the Treasury, has thrown down the gauntlet to the pension fund industry.

In a hard-hitting speech on Wednesday night to pension leaders, she warned that the industry must push through reforms in a number of key areas.

Kelly's concerns come two years after a governmentbacked report by top fund manager Paul Myners called for a wide-ranging overhaul of the pension fund sector.

The government has indicated that it will legislate if the industry does not put its own house in order.

Kelly aims to improve the professionalism of pension fund trustees and also wants more clarity for pension fund managers on the time horizons over which their performance is judged.

In addition, Kelly wants to widen and deepen the sources of advice available to pension funds, which is currently limited to a small group of actuaries and consultants.

She believes pension funds should devote more time to deciding how to allocate their assets between shares, bonds and other investments.

The government also wants more progress on shareholder activism.

Kelly plans to summon key players in the industry - including managers of the leading pension funds - for a series of summit meetings next month, ahead of a post-Myners progress report due by the end of the year.

A Treasury source said: 'Ruth said she would prefer not to legislate, but the government is prepared to do so if need be.'