Pace of change in pensions legislation ‘concerns’ trustees
13 November 2012
News, Global, United Kingdom
By Asia Asset Management
Nearly three-quarters of trustees surveyed (71%) feel that the amount of legislation and pace of change in the pensions industry is too much, with nearly half (47%) saying they are hindered in performing their duties as a trustee, according to research from MetLife Assurance Limited.
MetLife Assurance’s research showed that trustees of schemes with assets above £250 million (US$396.61 million) were more likely to state it hindered them in their duties (53%) while trustees for smaller pension schemes with below £250 million were more likely to state that legislation helps in their duties (20%).
Wayne Daniel, chief executive officer at MetLife Assurance, said: “It is concerning that some trustees feel they are being hindered in performing their job as a trustee, in particular due to the amount of legislation and pace of change. The fact that trustees of larger schemes worry about being able to perform their duties may hinder their efforts to find appropriate de-risking strategies that fit the unique needs of their scheme.”
The study further reveals that the prioritisation of de-risking by trustees remains high – two-thirds of trustees surveyed (65%) reported that the priority of de-risking in the context of the overall business objectives had remained the same over the course of the previous 12 months. Less than one in five surveyed (18%) said de-risking had become a greater priority in the last year and 15% said the priority was now lower. This represents a significant shift when compared to the 2010 survey results, where nearly two out of three trustees surveyed (64%) said their pension scheme priority had increased compared to the previous year and only 28% believed it had remained the same.
The research showed roughly two-thirds of the trustees surveyed (66%) have a plan in place to de-risk their company pension in the next five years – however, over one-third (37%) admitted to being “not very” or “not at all” prepared to engage in a de-risking provider selection process.
“There is an evident lack of knowledge by trustees of how to prepare for a de-risking exercise even though two-thirds are planning to de-risk the company pension scheme in the next five years,” Mr. Daniel observed.
Reassuringly, the overwhelming majority (92%) of trustees surveyed said that they shared the responsibility for de-risking with the employer, increasing from 85% in 2010. Indeed 93% felt that they receive enough assistance from the sponsoring employer to support their search for knowledge. Interestingly, retirement was cited as the overriding reason for the majority of trustees surveyed who expect to leave their position (57%).
Mr. Daniel said: “Acceptance and realisation of responsibility for de-risking a company pension scheme coupled with the majority feeling that they have the required level of training and support, signals a strong future for the working relationship between employers and trustees.”
The research by MetLife Assurance, which was concluded by BDRC Continental in Jan 2012, showed that consideration of different de-risking strategies increased compared to the 2010 results for the range of options presented. Significant rises can be seen for liability driven / asset risk strategies, from 48% to 70%, data cleansing from 10% to 39% and member options from 5% to 29%. Consideration of longevity risk hedging also increased from 30% to 48%, while those considering either buy-in or buyout increased only marginally from 34% to 39%.
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