GLOBAL - One out of every 10 pension funds in the UK has reported at least one incidence of fraud within the last two years.

A survey conducted by accountancy firm Baker Tilly found that 12% of all funds have suffered fraud over the period, with larger schemes having more than 10,000 members being hit the worst.

Schemes with fewer than 1,000 members reported no evidence of fraudulent activity.

But Ian Bell, head of pensions, said: "This should not necessarily be interpreted as smaller schemes being less susceptible to fraud. Larger schemes just tend to have more resources at their disposal and are therefore more likely to be able to detect frauds that have occurred."

Half of respondents to the survey cited member transactions - contributions and benefits - as being the areas most vulnerable to fraud.

More than 80% of respondents said their scheme management team or trustee board had actively considered fraud risk over the last two years, while more than 70% had taken some action to address fraud risk.

In other news, the notion that public sector defined benefit (DB) schemes are unfair on the private sector workforce is leading to a "race to the gutter" and undermining attempts to protect and improve private sector schemes, according to the Association of Member Nominated Trustees (AMNT).

Janice Turner, member-nominated trustee at the BECTU DB scheme, said: "Private sector MNTs find it very offensive that weakening public sector DB schemes is being justified on grounds that they are unfair to private sector workers who don't have those benefits. Weakening public sector DB schemes only makes it harder for those in the private sector to win badly needed improvements."

The AMNT - a recently formed not-for-profit organisation for former member-nominated trustees, directors and pension scheme representatives - said it recognised there were structural problems with DB schemes caused in particular by "inappropriate accounting standards" and "too frequent and too heavy regulation".

It said it planned to set up a working group on "defending DB", with a remit including looking at the feasibility of DB fund mergers, accounting standards, fees and charges and opportunities surrounding auto-enrolment. 

It also agreed that UK defined contribution schemes often compare poorly with DB schemes and with some schemes in other countries, notably the Netherlands and Denmark.

Similarly, it plans to establish a DC working group to investigate best practice, fee rates and how to improve the design of default funds, as well as to explore the use of collective DC schemes.

The AMNT currently has 150 members with more than £40bn in combined assets under management.

Finally, defined contribution (DC) investment providers need to be more creative, according to Pitmans Trustees.
Richard Butcher, managing director, said it was "incredibly difficult" for a member of a DC scheme to estimate his pension, as there were too many variables, such as future contributions, investment returns, charges and annuity conversion rates.

"This uncertainty could be causing people to save too little money and, at worse, be putting some people off of pension saving all together," he said.

"The focus has traditionally been on input - in other words, what you can afford. The member has then simply had to hope and eventually make do with the resultant output."
Butcher said "good member outcomes" would be more likely if the industry shifted its focus onto output, or the "benefits that emerge", and then innovated to "reduce the number of moving parts".
"Dynamic derisking, which is becoming increasingly common in the DB world, could be adapted for the DC world," he added. "It seems strange there are no DC funds that hedge out downside risk."