Reporting and cost disclosure across the Local Government Pension Scheme must become more transparent, experts have said, as a new report highlights wide discrepancy in the levels of charges passed on to scheme members.
The cost of fund management for members of Cheshire Pension Fund was 44 times the bill charged to their peers in West Yorkshire, according to a report from the Centre for Policy Studies released today.
Funding pressures and mounting deficits racked up the pressure on UK defined benefit arrangements in 2015, but schemes accepted the challenge and responded with some innovative moves to tackle liabilities.
Trustees of defined benefit schemes may need to change tack towards securing a “second best outcome” for members, as new analysis estimates 1,000 UK schemes will be unable to pay benefits in full due to “unmanageable stresses”.
Analysis: While many defined benefit schemes have yet to explore ways to provide enhanced flexibility to members, there are three key strategies in this area that could ease the pressure of mounting liabilities in 2016.
The Pensions Regulator has issued a practical guide on integrated risk management to help trustees assess and respond to covenant, investment and funding risks, but experts have said schemes will need additional help.
Pension assets under fiduciary management hit £114bn during 2015, but independent trustees remain sceptical of the alignment of interests underpinning such arrangements.
Midlands-based brewer Marston’s has bought in more than a third of its pension scheme liabilities since 2013 through a series of deals aimed at reducing volatility across its long-dated obligations and providing added security for members.
Feature: Sweeping closures of defined benefit schemes across the UK will limit the pain of future liabilities for sponsors, but have created a growing problem many pension funds have been slow to recognise: a cash flow crisis is on the horizon.
Defined contribution trustees must respond quickly when scheme sponsors go into administration, particularly in scenarios where financial distress has delayed payment of contributions into the safe haven of a scheme.
A group of seven Local Government Pension Scheme funds has appointed a manager to run a joint £6.5bn passive mandate, but the funds involved in the arrangement say longer-term plans for pooling are still under discussion.
