GLOBAL - Around 45% of pension funds find it challenging to comply with pension regulation following increased complexity in governance requirements, according to SEI Global Institutional Solutions.
Findings from SEI's global pension management research panel found 53% of pension funds in the UK, Netherlands, US, Canada and Hong Kong also faced challenges in monitoring the risk of scheme investments.
The research - questioning 305 executives overseeing pension assets ranging from £15m (€19m) to £2bn - suggested the most pressing governance challenge to have developed in the UK and Netherlands over the past two years has been "ensuring compliance with pension fund regulation".
In addition, the "quick poll survey" revealed UK schemes also revealed problems with the relationship between trustees and the corporate sponsors, as 71% of respondents specifically mentioned there are increasing difficulties in managing conflicts of interest.
These findings showed the number of schemes worrying about compliance with worldwide regulation rose from 31% in 2007 to 45% in 2008, while investment risk monitoring also became more challenging for 53% of schemes compared to 41% in the previous year.
That said, the research also revealed increases in the number of schemes concerned about other governance issues as 36% said they are worried about the evaluation of manager performance - up 12 percentage points from the 2007 study - while the formulation of investment policy was highlighted by 24% of respondents as akey concern, compared to 22% in the previous year.
Although respondents acknowledged governance is becoming more challenging, many are continuing to handle the oversight internally, with the number of organisations relying on internal committees and management rising from 55% in 2007 to 81% in 2008.
Of these, the majority were organisations in the US, Canada and Hong Kong, while 57% of UK respondents said they use outside advisers to provide regular and ongoing guidance, albeit the report claimed "some dissatisfaction" with third parties was reflected in the fact that 29% claimed it is now more challenging to evaluate the performance of investment advisers.
Meanwhile, the research - conducted as two surveys in June 2007 and April 2008 - also noted schemes around the world are struggling to maintain funding levels, as the number of schemes funded above 90% fell from 76% in 2007 to 67% in April 2008.
In addition, SEI revealed the number of schemes funded below the 80% "critical level" increased from 7% to 9% over the past year, with the UK reporting the highest percentage of plans funded below 80%, with a total of 16%.
Results show the number of global schemes funded between 91%-100% fell 12 percentage points to 32%, the number of plans with a funding level of between 101%-110% increased by four percentage points to 24%.
Findings pointed out as the Netherlands has different funding requirements to other parts of the world, the survey question was altered slightly but these results showed 17% of respondents oversee schemes which are funded at between 120-130% on an nFTK level, while 50% reported plans are 130-150% funded, and 33% confirmed a funding level of more than 150%.
The survey also highlighted the increased impact volatility is having on pension schemes as 62% of respondents, particularly in the US and Canada, claimed decreasing volatility was a higher priority than increasing returns - an increase of eight percentage points.
As a result the research showed pension funds globally are investing in strategies to help reduce the mis-match between assets and liabilities through liability-driven investment (LDI) models including the use of long-term investments and extension strategies.
SEI highlighted in the last nine months 51% of organisations are now invested in real estate, up from 41% in 2007, while 52% have moved into long-dated bonds compared to 40% the previous year.