UK - Members of struggling defined benefit schemes could lose out on £150m (US$237.5m) of benefits unless the trustees take control of their investment strategy, a consultant warned.
Hewitt Associates said volatile markets had severely affected asset values, while constraints on liquidity and cashflow meant additional deficit contributions were out of the question for an increasing minority of company sponsors.
The consultant said about 15,000 people in the UK could lose at least 20% of their pension benefits if the trustees of around 75 troubled schemes did not take control of investment strategy.
Hewitt warned it could amount to a loss of £150m in pension benefits over the next two years.
Hewitt principal consultant Russell Agius said: "We estimate that in the UK there are approximately 75 schemes with no resources to combat their deficits. They face a tough choice - scheme wind up resulting in company insolvency or identifying a winning investment strategy which can grow the assets."
He added: "Hewitt calculations show that around 15,000 DB scheme members could lose an estimated fifth of their benefits - valued around £10,000 each - if their scheme enters the PPF. Such an influx of insolvencies would lead to a bigger strain on the PPF, and ultimately the levy payers."
Hewitt global investment practice principal consultant John Belgrove said the only real alternative for trustees in this situation is to reduce deficits with an investment strategy which mitigated uncontrolled risk while driving consistent returns.
He said: "In today's complex investment environment, there are options available to trustees that can genuinely improve scheme efficiency and ultimately reduce further potential strain on the PPF. Trustees should act now and re-view their options."
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