Add governance to underfunding, and what do you get? Not Mary Poppins, says Benjie Fraser, but possibly higher taxes.

Board structures, managing conflicts of interest and training are key areas of focus for all levels of the industry, including trustees, sponsors, supervisors and lawmakers. But nowhere is the new landscape more observable than at the trustee level, where the minefield of regulations and lawsuits makes retaining a good talent pool an increasingly challenging business. Recent studies confirm the direct influence of competency at the trustee level as a measurable factor towards improving overall fund performance, making governance all the more critical.

With new regulations have come requirements for fewer but better trained trustees, the ability to develop a core of independent chairs of trustees with strong outside business acumen and - last but not least - better purchasing power for the fund in terms of underlying costs. The level of skills alone required to manage the range of fund regulations makes finding the right trustees a challenge. Above all, a huge focus for regulators is to improve trustee knowledge and awareness. Accreditations, self-assessments, formal training programmes within the annual trustee cycle are all becoming the norm. Education is the watchword. Are there different standards of governance protocol being applied globally? Of course.

Might we then see a proliferation of international standards for pension trustees? Perhaps. There is, of course, a lot of wood to chop before then.

Now take a cup of governance and add two teaspoons of underfunding to the world's largest pension market and what do you get? Clearly, not Mary Poppins.

Is the current experience in the US the shape of things to come in Europe, as their government bodies have sought answers to resolve the widespread underfunding of state and local pension systems, of which 78% participate in defined benefit plans? Proposals range from incorporating a defined contribution element to reducing post-retirement benefits, to raising the retirement age for future participants.

The latter has led to quite a bit of controversy when offered as a remedy for inadequate public finances. Regularly, the media promote stories of passionate public hearings and large-scale demonstrations both for and against the idea. In the US, where fierce debate focuses on budgetary shortfalls, 90% of state retirement systems reporting actuarial data in 2011 were designated as underfunded. Raising the retirement age might provide some relief to state budgets, even as the ranks of retirees increase, without resorting to the most dreaded option of all - raising taxes. A successful recent effort to increase the retirement age for members of the third-largest US public pension, managed by the State of New York, required the careful negotiation of multiple parties, including several powerful unions that represent state and local workers who strongly objected to the original measures.

In spite of the controversy, in the long run, raising retirement ages could save taxpayer dollars. Until this all gets agreed, life on Planet Pension remains a bit of a merry-go-round.

Benjie Fraser is Global Pensions Executive at JP Morgan's Worldwide Securities Services business