Talking Point: the security of a sponsoring employer

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  • Talking Point: the security of a sponsoring employer

TALKING POINT -The turbulence of the last year has shown while many pension funds' risk strategies are focused on the short-term volatility of the financial markets, economic pressures elsewhere could present bigger questions about the strength of the employer covenant or a sponsor's financial backing.

Recent calls for the bailout of US car manufacturers, for example, serve to highlight the fragility of security some pension funds may actually have, in situations where there is no back-up fund to support the pension fund in the future.

Woolworths' decision to call in the administrators also suggests pension funds may need to seek additional security for future pensions funding after all as there is no guarantee in the current climate a company will still exist next week.

So just how strong is the backing of a sponsoring employer to a pension fund, and should pension officials now be reviewing the financial arrangements?

We'd like to hear your views on the matter so if you have any comments you would like to this week's Talking Point email and we will post your comments to continue the discussion.

(Updated with new argument on 27 Nov 2008)

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