A Mercer study released today has revealed that over a third of the UKs corporate pension fund trustees do not do enough to make sure companies can meet their pension obligations.
The Mercer consultant did research into pension trustees procedures and shocking found that 37 out of the 119 schemes questioned only scrutinise the finances of companies involved once a year.
By only doing annual checks, they allow the businesses involved to cover up potential balance sheet weaknesses and could miss telling signs that make the companies unable to contribute to the corporate pension schemes.
Mercer’s Rachel Brougham found that ‘”quite a significant proportion” of trustee’s measured only looked at finances annual, and some did so less often.
Pension trustees have legal responsibility for the running of such pension funds, and should therefore be substantially more informed when making critical decisions that may affect the health of the fund.
The trustees tend to be retired and active staff members sitting on a board, and Brougham added,” are required to review the financial health of the sponsoring company, ideally every quarter.”
“There are some boards of trustees who do not want to be seen to be picking a fight. It is their job but a lot of trustees are employed by the sponsors and what they do not want to hack the sponsor off to the point that they will close the scheme down,” she points out.
Failure to fully understand the sponsors strength “ultimately impacts on the security of the member’s benefit,” she added, hoping companies would become more vigilant, before more schemes suffer and fall into a position of not being able to pay out their members pensions.