UK – Pensions consultancy Towers Perrin has set up a new service to focus solely on advice to corporates with pension schemes, without the potential conflicts arising from also advising trustees. More assertive pension trustees have led to some high-profile corporate deals being abandoned, it pointed out.

The move to set up the Corporate Pensions Solutions (CPS) service reflects the growing demand of companies for innovative advice separate from the compliance-driven advice received by the trustees, said Towers.

CPS comprises a dedicated group of actuaries and specialist consultants designed to advise sponsors about all aspects of corporate pensions management.

“Defined benefit pension plan financing is increasingly causing conflicts of interest between trustees and companies because deficits and untenable ongoing costs are threatening the sponsoring company,” said Mark Duke, who heads CPS.

He added: “Company executives will need independent third-party advice to help them protect shareholder interests and implement pension solutions that fully support the company’s objectives.”

Towers claims that under the new 2004 Pensions Act and the pensions regulator’s comments means that the era is over of trustee and plan-sponsor conversations about funding and investment being brokered by the trustee advisors is coming to an end.

“Companies will face more assertive trustees who now have to take a proactive approach to ensuring pension fund assets cover liabilities.”

The consultants reckon this should be replaced by a negotiation process. “Companies need to take a lead in the negotiations with trustees,” said Duke. “Relying on the trustees’ advisers to come up with a corporate-friendly solution is extremely dangerous.”

Research by Towers found that one-third of corporates already receives actuarial advice separately from the trustees and sees this proportion growing. “A further quarter recognises that their reliance on advice from the scheme actuary is untenable as the potential for conflicts of interest is growing.”

However, Towers said that where both the sponsoring company and the trustees were agreeable that they continued to be advised by the firm, it was prepared to continue with these relationships.