Trustee Barometer 2015: The road to a resilient pension scheme
24 Nov 2015 - Estimated reading time: 14 minutes
Our Trustee Barometer 2015 highlights the complexity Trustees of DB schemes are dealing with. Whilst a myriad of issues are preoccupying their minds, our survey identifies three key challenges emerging in the world of Trusteeship.
1. Integrating cash, investments and covenant is the biggest challenge
- Trustees tell us their biggest challenge is having a fully integrated and risk based approach to funding. This comes off the back of the Pension Regulator’s annual statement, which delivered a strong message about the value of an integrated approach.
- Weaving the three key dimensions – contributions, investments and covenant – into funding approaches will bring clarity on scheme risks, their interdependencies and how to reduce them, ultimately improving the security of members’ benefits.
2. Measurable milestones are needed
- With 40% of trustees having no defined timeframe to meet their goal, this raises the question, are trustees setting themselves truly measurable milestones to hit along the road towards their long-term goal?
- We developed our Road to Resilience mapping tool to help trustees to focus on their key risks given their schemes’ financial status, and to manage their journey, from wherever they are today to their end destination.
3. It’s time to plan for drawdown
Only 4% of trustees consider cashflow negativity as an issue for their scheme, however our analysis of the FTSE350 shows 50% are already, or are nearing this state.
It’s time to break the shackles of pure balance sheet risk management and enhance this by planning for money in and money out. This is a here and now issue schemes need to be considering; the risk of not doing so is being forced to sell assets at depressed prices.