UK - Local authority leaders fear a crisis if they are unable to manage pension scheme deficits, a new survey shows.
More than 85% of senior executives cite pension scheme deficits as their greatest concern and slightly more – 87% – are worried about the implications deficits could have for the local authority as a whole.
The study – carried out by fund manager SEI Investments – also shows that local authorities are dissatisfied with the advice provided by existing advisers. A total of 62% said they were told things they already knew, while over half said their advisers tended to be reactive rather than proactive.
The majority felt they spent too much time on the process of hiring and firing investment managers and three-quarters believed the process cost too much.
When asked how the management of their pension fund could be improved, 93% said the process should focus more on qualitative manager selection and greater risk control and 77% said they would like access to specialist managers for every market.
SEI director of institutional sales Paul Osbourne said the research revealed increasing deficits and growing regulation meant local authorities faced the same problems as corporates.
“Senior executives of local authority pension schemes are under more pressure than ever because of serious issues that are forcing changes to their financial structure.
“These issues include underfunding and its likely impact on the local tax base, growing regulation and the ongoing demands of complying with the Myners Report.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.