UK - Russell Investments has warned pension funds that lack of good governance on their part can lead to a loss of return.
The asset manager said the ever-growing problem of underfunding, as well the increasing number of sources of risk, posed problems for schemes.
Sorca Kelly-Scholte, managing director of consulting and advisory services, said: "If governance structures are to match the investment ambitions of a pension fund, funds first need to be able to review their existing decision-making structure from an informed standpoint.
"Poor governance can cost pension funds up to 3% per annum. Our research has shown a clear 'confidence bias' amongst pension funds about their current decision-making processes."
Kelly-Scholte said 86% of respondents felt their current decision-making structure was effective, "despite evidence of non-conformity with agreed principles of best practice".
Meanwhile, schemes in the Pension Protection Fund (PPF) index closed the year with a surplus of £21.7bn, an improvement from its £1bn deficit in November.
While aggregate liabilities rose by £9bn between November and December, overall assets increased by more than £30bn.
Funding ratios across all 6,500 schemes also rose to 102.3%, despite the majority of schemes still being in deficit and only 40% being fully funded.
However, compared with the previous month, almost 250 fewer schemes are in deficit.