UK – Less than a third of UK pension scheme trustees consider they have a very good understanding of investment principles.
Furthermore, according to a survey carried out by Merrill Lynch Investment Managers and Engaged Investor Magazine, even fewer – 22% - rate their understanding on trust and pensions law highly. One-third said they understood pensions law only slightly, or not at all.
This lack of confidence exists in spite of the fact that 76% of trustees said they attended training courses in 2005.
The survey involved detailed interviews of 100 trustees of FTSE350 company pension schemes. Of these, 57% were member-nominated trustees.
Even though two-thirds of trustees lack a very good understanding of investment in general, four out of five are very confident in their understanding of their pension fund’s asset allocation, as well as their reasons for appointing investment managers.
Asked what was the most important factor when hiring managers, 64% said “trust in the ability of a fund manager”. This outstripped both the opinion of their consultant, and strong performance track records, in importance.
But one in seven trustees do not know what benchmarking is used by their scheme, and one in four are unaware of the valuation method which is used.
Meanwhile, 69% of those surveyed said their pension scheme had a funding deficit -- although only 16% said this was a major issue for them -- with 85% blaming poor stock market performance for the shortfall.
The most widespread issues of concern were “fund problems” (with 26% of trustees naming these) and “the need to raise contributions” (mentioned by 24% of trustees).
The trustees considered regulation to be a major headache.
Of those interviewed, 44% said that getting to grips with the Pensions Act was a major personal challenge, while 26% claimed to spend between three and five days each month on pensions matters.
However, 88% of trustees said they plan to attend a training course next year.