Employers urged to watch pension scheme fund trustees’ investment strategy

Employers have been urged to step up their watch on pension scheme trustees after a report showed that many funds were coming out of debt.

The annual report by Lane Clark & Peacock showed that FTSE 100 firms had an aggregate pension funding surplus for the first time in five years.

Ken Willis, investment partner at the actuary firm, told Personnel Today that this situation was “fairly representative of the UK as a whole”. He said this meant that trustees – elected to run pension funds on behalf of employers and staff – would face new investment decisions.

“This will change the mindset of trustees,” he said. “Being a trustee is tough. They are getting there, but they are constantly trying to improve their knowledge of new ideas.

“Employers run the risk, so they need to get more involved with trustees, helping them manage their investment strategy. They need to be more proactive and more dynamic.”

Fellow partner Bob Scott added that the pensions funding surplus – largely caused by a long-term rise in the stock market – could see areturn of defined benefit pension schemes.

More than half of the FTSE 100 firms have now closed final salary schemes to new members. But Scott said: “I suspect we have not seen the end of defined benefit schemes.”

There were £20bn worth of pension funding surpluses among FTSE 100 firms in mid-July 2007, and just £12bn of deficits. This compared with an overall deficit of £36bn the year before.

However, many schemes are at risk of returning to deficit following the recent downturn in the stock market. An increase in life expectancy of just one year would add £12bn to the pension liabilities of the 100 companies.

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