The ever-changing DB pensions landscape creates a testing environment for sponsors and trustees alike. The challenges identified by schemes as the most pressing included:
1. Long-term objectives – making meaningful progress towards a suitable end state
2. Funding constraints – achieving an acceptable outcome on funding that is consistent with the sponsor’s level of affordability and covenant
3. Keeping up with change – responding to pensions Freedom and Choice for members, cyber risk, GMP reconciliations
4. Balancing the interests of stakeholders – for example, funding negotiations, investment policy and communicating member options
5. Uncertainty – managing volatility of pension cost / pensions in the corporate accounts
Gary Cowler, partner and head of Integrated Pensions Clients at Aon, said: “Trustees are faced with a baffling range of scheme responsibilities. As well as keeping up with long-term objectives in an environment of ow gilt yields and the expectation of lower asset returns, trustees and sponsors must negotiate a balance between support for the scheme and continued investment in the sponsor’s business.
“Our experience is increasingly that a joined-up approach between scheme trustees, administrators, actuaries and advisers is imperative. It’s also clear that that effective administration processes can play a role in lessening the burden of these challenges and enabling positive change.”
Gary Cowler continued: “Among the more than 200 schemes that Aon administers in the UK we have seen a six-fold increase in transfer values paid out between 2014 and 2017. This is a huge challenge for administrators, not just in increased volumes of transactions, but in increased member expectations. A joined-up approach is crucial to getting the best outcome for both members and the scheme.”
This work builds on the ‘10 Biggest Administration Challenges’ published by Aon last year, which identified the 10 biggest issues schemes struggle with in relation to administration.
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