UK – It’s time for trustees and companies to work together to find solutions – this is the message from actuarial consultant Hymans Robertson.
Speaking at a conference in London today, Neil Puxley, head of Hyman’s actuarial practice in Scotland, called on trustees in the UK to work with the sponsoring company.
Puxley suggested that both the investment strategy and benefit strategy of a fund must evaluated. With regards to benefit strategy, he said that there had been “some pretty unimaginative thinking in terms of benefit design so far”.
The switch to defined contribution in a bid to cut costs could lead to a crisis of its own when, in several years, employees find themselves retiring on an inadequate pension.
Puxley instead suggests that employees and employers share the burden. He says the sponsoring company could provide a defined benefit scheme with slightly less provision. This could be topped up with a money purchase scheme which is solely the employee’s responsibility.
Puxley also highlighted the issue of asset allocation, saying that swinging from 70:30 in equities and bonds to 30:70 was not the solution. While he admitted that there was no right answer, he suggested as an idea a 50:50 split which allowed for some upside, and reduced “wipe out” risk.
According to Schroders, trustees are already reviewing investment strategy in relation to liabilities in more detail. While the issue of the equity/bond mix still dominates, Schroders says that trustees are increasingly taking an interest in new approaches.
Schroders’ executive director Steve Aukett expects to see unconstrained equity mandates gaining ground and derivative based structures used for many funds.