UK - New funding requirements being introduced as part of the Pensions Act could widen the division between the role of the trustee and the sponsoring company, says Aaron Punwani, partner at Lane Clark & Peacock.
“It could make things more polarised than it has been in the past but I think that’s just a reality of a situation where pension funds are in deficit and trustees see themselves as creditors of the company, rather more so than in the past,” he said.
“In funding the pension scheme trustees need to think about: what terms am I offering for servicing this debt – they’ve always seen themselves as a lender to the company.”
Punwani said trustee training and understanding is crucial as trustees are expected to take on a bigger role in ensuring the plan is being appropriately funded.
“They’re expected to negotiate with the company on contributions, they’re expected to be independent and robust, so it’s much more important they understand what risk they’re taking on to do that,” he said.
LCP recently launched a new package for trustees – LCP Sprint – which provides actuarial valuations and investment strategy advice for defined benefit schemes.
“We take [trustees] through the different combinations of funding plans and investment strategies and assumed returns and we find that doing that in real time really helps the trustees focus on the big issues and make decisions that are appropriate for their scheme,” Punwani said.
LCP is using the strategy for most of its closed defined benefit plans when they come up for their actuarial valuation.
Investors, driven by depressed interest rates, slower global economic growth and rich equity market valuations are examining non-traditional investment opportunities.
The registration deadline for the Workplace Savings & Benefits Awards 2019 is today.
This week's top stories were the DWP giving the green light to CDC and TPR granting extensions for 11 master trust authorisation applications.
Susan Martin says building strong foundations for business are the only way forward as the pensions industry is radically shaken up