A new study claims pension fund trustees in the UK have become like bankers – although they probably are not managing credit risk as bankers would.
The new Pensions Regulator, argue John Hawkins and Cliff Speed, made trustees “start thinking they are like any other unsecured company creditor – in other words, like a banker”.
“The trustee is dead; long live the pension trustee creditor,” they write in a specialist magazine for corporate treasurers.
Hawkins, former head of finance and risk at Invensys and Speed, principal consultant at Hewitt Bacon & Woodrow, put forward ways trustees can deal with credit risk. Techniques include short selling sponsoring companies’ shares, derivates and complex strategies such as sponsor-guaranteed loans or special purpose vehicles.
They say: “Trustees have a duty to reinvent themselves as creditors to ensure they manage pension scheme deficits.”