Posts by Alan

Alan Collins

Alan Collins

Head of Trustee Advisory Services at Spence he provides actuarial, funding and investment advice to trustees and sponsors of ongoing defined benefit schemes.
Alan Collins

In the current challenging times on so many fronts, thinking about/writing about actuarial valuations leads me to ask “so what” from time to time and you may well feel the same.

However, if not, then hopefully the following will give some useful reminders / pointers for sponsors and trustees with an actuarial valuation due in the coming weeks and months.

  • Unless schemes are already very well-funded and very well protected against interest rate movements and have low levels of growth/equity assets, their funding level will have taken a hit over recent weeks. The degree of the hit will be dictated by the levels of exposure in these areas. My experience is seeing schemes which are broadly unaffected (perhaps still 1%-2% down) to seeing with funding levels falling by 15% or more since around mid-February.
  • For open schemes, even those that are well funded, current market conditions will result in higher expected costs of benefit accrual. This is primarily due to lower interest rates / lower long-term rates of expected investment return. For a typical final salary or Career Average Revalued Earnings (CARE) scheme, it could increase costs by 5% of salary or more. Unless other action is taken, this increased cost will fall on company sponsors.
  • Given the above, I think it is very important to know where you stand – technology is available now such that all trustees and sponsors should be able to ascertain their funding positions on an up-to-date basis. Peter Drucker’s famous saying of “what gets measured, gets managed” has never been truer than today.
  • As legislation stands, actuarial valuation dates must be no more than 3 years apart. So, you will not be able to defer the effective date of your valuation. I assume it is pretty unlikely that schemes will want to bring valuation dates forward to now unless there is a requirement/very good reason to do so.
  • So, your results need to be measured at the valuation date. However, crucially, any resulting funding recovery plan does not. A recovery plan (and schedule of contributions) can take account of changing (and hopefully improving) market conditions during the 15-month period in which valuations need to be completed. I have seen this occur several times now e.g. valuations which took place shortly after the credit crunch in late 2007/early 2008 and those which took place shortly after the EU Referendum vote in 2016, showed much better positions by the time they were due to be signed off.
  • Reducing risk may mean selling some assets at a price below the peak they reached just a few weeks/months ago. However, if doing so can move you towards your ultimate goal more effectively, then it will be the best thing to do. Over the early 2000s, I saw many trustees miss out on de-risking opportunities while they hung on for market to “return” to pre-crash levels.

Overall, managing a defined benefit pension scheme remains a long-term enterprise. I hope this bump in the road, like several others before, is overcome quickly. My key messages are keep thinking and planning for the long-term, keep up to date with what is happening (with the scheme and your sponsor) and continue to look to reduce risk gradually over time when you can. 

Alan Collins

Following the clear result of the December 2019 UK general election, 2020 was always going to be a big year for the pensions regulatory landscape. With the Pension Schemes Bill working its way through parliament, The Pensions Regulator has also set out its vision for the remainder of the year. I look at some of these areas below.

Revised Funding Code for Defined Benefit (DB) Schemes


Consultation on the revised funding code will commence in March (on the principles of funding, with the detail to follow in a further consultation late in the year).

The two main pillars of the new code are likely to be risk management and long-term funding. Previous statements from the Regulator have encouraged schemes to set long-term “secondary” funding objectives and contingency planning. I would expect the code to give greater clarity to these objectives and turn them into “must haves” not “nice to haves”.

The new code will contain two routes for schemes to follow. The “fast-track” route will set out certain conditions which, if met, will avoid the regulatory scrutiny of the “bespoke” route. I would expect the fast-track conditions will relate to areas such as strength of funding target, investment strategy and length of recovery period. The big question for me will be how many schemes will be able to follow the fast-track route? If the conditions are too onerous, then it may not do much to reduce the Regulator’s workload.

Consolidation – clarity on DC schemes, caution on DB schemes


The future of occupational Defined Contribution (DC) schemes is clear. Further consolidation is inevitable and has widespread support. The days of small to medium DC schemes, and DC sections of hybrid schemes, are numbered.

However, there is less clarity (or should that be Clara-ty) when it comes to DB consolidation and DB superfunds. While supportive of the principles of DB consolidation, the Regulator is “concerned” about separating schemes from their sponsors and the lack of an authorisation regime.

DB consolidation will continue, especially in schemes with the same sponsors (or sponsors in the same group) and with “traditional” consolidators. However, to me, the first deal with the new consolidators does not look any closer than it did this time last year.

Pension scheme governance – “No” to Professional Trustees for every scheme


The big question on the recent consultation into the “Future of trusteeship and governance” was whether or not it should become mandatory in due course for each scheme to engage a professional trustee. The answer for now is “no”, but the Regulator has confirmed its support for professional trusteeship accreditation and an industry code for sole trusteeship. 

Following the consultation, the Regulator will also be establishing and leading an industry working group with the aim of improving diversity and inclusion on trustee boards. Further consultation will also follow on changes to the Trustee Knowledge and Understanding code, leading to updates to the Trustee Toolkit in due course.

Alan Collins

Most occupational pension schemes must provide a regular, usually annual, scheme return to The Pensions Regulator (TPR), containing prescribed information that, in part, depends on the type of scheme (DB, DC or Hybrid).

TPR typically issues a scheme return notice in December for DB schemes, and July for DC schemes.

Online process

Schemes must submit their forms using TPR’s online service, Exchange; trustees can access the online form only within the period during which they are obliged to complete it. Trustees must file a scheme return by the date stated on the notice. This will be at least 28 days after the date the notice was issued but, in practice, TPR aims to give six weeks to complete the scheme return. That said, it cannot offer any extension to the deadline.

The information required in a scheme return is summarised on the TPR’s website, together with a checklist showing any recent additions to the return.

If trustees fail to provide a scheme return, they may be liable for a civil penalty of up to £5,000 in the case of an individual and up to £50,000 in other cases.

Additional requirements

  • From 2018, scheme returns needed to include common and conditional (now known as ‘scheme-specific’) data scores. Common data is the basic information all schemes need to uniquely identify individual members. Scheme-specific data is member data that trustees require to enable them to administer their particular scheme.
  • From 2019, trustees submitting DC returns will be asked to confirm when they last measured their scheme’s common data and scheme-specific data. This question has been included to allow TPR to track progress of schemes as they incorporate the record-keeping standards.

If TPR has concerns that its record-keeping standards are not being met, it may engage with individual schemes. If trustees fail to demonstrate they are taking “appropriate steps” to improve records, TPR may take action.

Data in the spotlight

So, in addition to other developments where quality of pension scheme data will be under the spotlight, such as pensions dashboards and addressing inequalities arising from Guaranteed Minimum Pensions, scheme returns are another example of why, when it comes to ‘dirty data’, there is increasingly no place to hide.

Alan Collins

As the year draws to an end, I find myself reflecting on a strange 12 months for pensions; with a bit of planning blight in terms of substantive new law and policy, due to Brexit, but still several important developments. My main take-aways are as follows:

Those who can see the hills are running for them

Risk transfers, i.e. buy-ins and buy-outs for defined benefit pension schemes, are inexorably rising. The amount of assets transferred to insurers has broadly doubled year-on-year over the last three years and is expected to exceed £40 billion by the year end. 2019 has been notable for several mega-deals; e.g. National Grid, Telent and Rolls Royce.B

For well-funded schemes which have taken financial risks off the table, there is very little upside in continuing when an exit route is affordable. After all, securing benefits with an insurer represents “job done” for trustees and sponsors.

While doubling again in 2020 seems unlikely, it is clear that risk transfers will provide some major pension stories over the next twelve months.

The need for member engagement is growing

As schemes mature, the proportion of members in the retirement “zone” (currently 55+) is rising and more and more members are seeking regular quotations of their benefits. Also, a recent survey by the Office for National Statistics indicated that pensions has overtaken household property to become the largest component of household wealth. For many schemes I am involved in, the average value of a member’s benefit is often in excess of £100,000.

So, how do members take the important decisions around their retirement? For me, access to timely, accurate and understandable information is of key importance. Technology is developing all the time and members can now do much better than the “paper-only” methods of old.

I also think the tide is turning on “accessibility to advice” for pension scheme members. Trustees have historically shied away from having “on tap” advice available to members, but there is a growing recognition that a member adviser is a useful addition the suite of scheme advisers.

Another topical issue, which is unlikely to go away any time soon, is whether trustees should offer their defined benefit pension scheme members a ‘partial’ transfer option – allowing them to retain some of the guarantees associated with DB pensions whilst also having complete freedom and choice over the part of their benefits they transfer to the own personal arrangement.

CMA review and ESG has increased documentation, but what else will it change?

There were some much talked-about changes brought in following the Competition and Market Authority’s review of the investment consultancy and fiduciary management industry. Investment consultants now need to have objectives set for them by trustees and fiduciary mandates need a one-time open market tender (if not done already). 

Environmental, Social and Governance (ESG) issues were also a hot topic and, with further changes still to take effect and the ‘Greta Thunberg effect’, will continue to be so.

All schemes should have updated their Statement of Investment Principles to set out their policy on ESG matters. Investment managers were also falling over themselves to extol their “green” credentials.

Time will tell how much change will come about as a result – so far, there has been a lot of box-ticking.

The Regulator is sharpening its stick

With Parliament being somewhat “distracted” for most of the year, there was little progress on pension regulatory matters. The long-awaited Pensions Bill made it into not one, but two, Queen’s speeches and looks all set to progress next year. The Bill will include, amongst other things, greater powers for The Pensions Regulator and possible jail sentences for reckless employers who fail to look after pension schemes.

Consultation on the new defined benefit scheme funding code is expected early in 2020. It is likely to involve ramping up the pressure on under-funded schemes, seeking shorter recovery plans, more conservative investment strategies for maturing schemes, avoiding “covenant leakage” and the development of longer-term “end-game” plans for all schemes.

The time for talking about GMP equalisation is over

And, finally, a “current issues” article on defined benefit pensions would not be complete without some comment on GMP equalisation (GMP-E). We (and I should really say I) have gone through the eye-rolling, the denial, the “wait and see” and the “mañana”. Time is up for all of these approaches and work really needs to start in earnest in sorting out the relevant data and amending the member benefits.

Look out for the HMRC guidance due to be published in January.

Given the levels of fees that some service providers are quoting for GMP-E work, it will also be interesting to see whether some trustees put projects out to tender rather than just telling the incumbent advisers to get on with it.

Alan Collins


2020 will definitely see progress being made towards a new funding code for defined benefit schemes. The Pensions Regulator has recently made clear that, despite numerous delays to date, consultation on the code will likely begin in January of next year.

Armed with new powers, the new code and its “clear, quicker, tougher” approach, the Regulator’s presence will loom large for many trustees. So, how then, will trustees keep the regulatory “wolf” from the door. 

Top tips

Here are some of my top tips and recent experiences.

1. Recognise and document your long-term objective

For all but the very largest of closed schemes, the end-point will be some form of insurance arrangement (consolidate or buyout).  It is therefore important, as schemes mature, to put a greater focus on this end-point and estimate how long it will take to get there. This will likely mean contributions continuing even after the scheme has a surplus on the ongoing (technical provisions) basis. 

So, trustees should get to know how long the path to buyout is and plan out their strategy to get there (including any investment de-risking along the way). Developing contingency plans with agreed actions for good and bad outcomes will also be very worthwhile.

2. Use an Integrated Risk Management approach to manage and monitor covenant, funding and investment.

Most schemes regularly review funding levels, investment performance and (perhaps less frequently) sponsor covenant. Often, however, these three strands are looked at in insolation and not part of a single “package”. To meet long-terms objectives, it is important to manage all of these risks together.  

I have found it helpful to collate some key metrics for each area into a single one-page dashboard. This allows trustees to review overall progress and importantly review the need to take any action. Funding and investment metrics should be readily available, and it is worth engaging with the sponsor to get regular updates on key metrics in their business – they will be monitoring these so it should be easy to get hold of them to help trustees do the same.

3. Get-together more often

For me, the days of a “once a year” meeting and nothing much in between are gone. With volatile financial markets and the potential for fast-changing outlooks for sponsor covenants, schemes are “businesses” which need more regular attention. 

In my experience, most scheme trustees would now expect to arrange some sort of meeting on at least a quarterly basis to review investment performance, funding progression and administration matters. These meetings need not be long and, with improving technology, need not be face-to-face either. Agendas can also be structured to allow advisers/providers to attend in part.

4. Make sure the basics are done

It sounds obvious, and maybe it is, but getting the basics right is important. Trustees should be making sure that:

  • Data is clean, complete and up-to-date.
  • Conflicts (and potential conflicts) are documented and discussed.
  • Scheme documentation is complete and consolidated.
  • Trustee Knowledge and Understanding is up to date, documented and future training is scheduled in.
  • Investment compliance is up to date (ESG, Investment Objectives documented).
  • Scheme business plans and risk registers are “live” documents, not just pages that gather dust between meetings.
  • Future project work is factored in e.g. GMP equalisation.
  • Be up-front if your scheme doesn’t fit with the ideal expectations of the Regulator

Back in the day, a recovery plan of over 10 years was a warning “flag” that often triggered some regulatory scrutiny. That was all washed away with the more employer friendly “sustainable growth objective”. The new funding code is likely to view 7 years as the benchmark recovery period. Indeed, I have already seen the Regulator gather information for schemes where the current recovery period is above that threshold.

However, it is also fair to say that many schemes, for many reasons, will have longer recovery plans that the Regulator will now view as appropriate e.g. charities, schemes with weaker sponsors.

Here, it is important for trustees to examine and clearly document the rationale for a longer recovery period. If affordability is shown to be constrained, it is likely that a longer recovery period should go hand in hand with a more cautious investment strategy. Taking risk on your sponsor (as demonstrated by a longer plan) should not be compounded by a higher risk investment strategy that the sponsor cannot afford to underwrite.

For me, a well set out and justifiable longer recovery plan with a cautious investment strategy is far better than over-optimistic actuarial basis and a “wing and a prayer” investment strategy which give the misleading impression of achievability.

Alan Collins

20 years in pensions

Last week, I passed through the ‘20 years in pensions’ landmark. Year 21 is as busy as ever, but I did find some time to pause for some reflection.

1999 was my first year in a ‘proper job’. It was the year when people waited to party like Prince predicted back in 1982. It was the year when businesses were fixated by the impending doom of the Millennium Bug, which after greater preparation, pretty much came to nothing (see GDPR). In 1999, Scotland had recently qualified for a major football tournament and suffered its first of many glorious failures in attempting to qualify for Euro 2000. Ah, the days of glorious failure instead of just plain old failure.

I started work in Towers Perrin’s North of England Office (St Albans!) and so my quest for the actuarial fellowship qualification commenced. In the financial world of 1999, the Bank of England base rate was 5.0% a year (no I haven’t missed the decimal point). Long-term interest rates were expected to average at 4.5% a year for the next 20 years.

So, if you were to borrow £1,000 for 20 years back in 1999, you would be expected to pay back £2,412 i.e. £1,412 of interest. Today, the amount to pay back would only be around £1,220 i.e. only £220 on interest of around 1% a year.

The late-90s pensions industry was adapting to the post-Maxwell world of the Pensions Act 1995 (PA95) and the soon to be forgotten Minimum Funding Requirement (MFR). Amongst a raft of legislation, PA95 introduced mandatory pension in payment increases and enshrined in law the protection of pension benefits built up in the past.

It was also a time-period when it was becoming clear that the actuarial profession had significantly underestimated life expectancy. This was (and still is) another significant factor in past pension promises costing more than had been expected.

My years in pensions have sped past, now finding my home at Spence for almost ten years now. Fellowship of the actuarial profession eventually came in 2006 and I have been proud to advise many pension scheme trustees as their Scheme Actuary since 2008. I have seen the sad, but inevitable, demise of final salary pension schemes for most members. As such, my job in the main involves helping trustees and sponsors deliver the past benefits that have been built up.

To end this reflection, I mused about the most significant turning points in the pensions industry over my time. Several came to mind, but I would plump for the introduction of full buyout solvency debts on sponsoring employers and the introduction of the Pension Protection Fund (PPF).

From what I recall, the introduction of full buyout debt sort of snuck up on sponsoring employers. Of course, the vast majority want to provide full pensions for all members. However, with the huge challenges and costs of pension schemes, how many would turn back the clock and wind-up schemes with lower obligations? Very many, I am sure.

The mere existence of the PPF is often cause for celebration and rightly so. In the fifteen years since it opened its doors, it has given shelter to around 250,000 members and undoubtedly provided them with a much better financial outcome than would otherwise have been the case. So, to the next 20 years.

What will happen? Don’t ask me, I’m an actuary!

Alan Collins

The art of discretion

Discretion matters for pension schemes and their members. If you know your Shakespeare, discretion is ‘the better part of valor’ (Henry IV), meaning better to be cautious than make rash decisions. Also a consideration for pension schemes and members, but not the kind of discretion I want to discuss here.

When pension scheme trustees operate discretion over who receives pension benefits, the benefits will not be subject to inheritance tax (IHT). Discretionary benefits are usually lump sum payments on death in service (normally insured due to the amounts involved) and sometimes also death after retirement payments.

Members are given the opportunity to complete an expression of wish (or nomination) form where they can give the trustees a note of their preferred beneficiaries and the proportion of any benefits they would like paid to each. But these nominations are always (to the surprise of many) not actually binding on the trustees. The trustees have the freedom to choose to whom to pay the benefits – this decision is at their ‘discretion’. The nominations are for guidance only, otherwise the IHT benefit would be lost.

In most cases, trustees will ask for a copy of the deceased’s will and details of financial dependence so they can determine the circumstances of the case before making a decision.

Going against the grain

Sometimes the decision can be straightforward. In other cases, trustees can face a tricky task when there are multiple beneficiaries or the deceased does not nominate relatives. They may choose to follow the member’s expression of wishes. Or after considering all the circumstances available to them and exercising discretion with due care and attention, the trustees may make a decision that is not in line with the member’s nomination.

One area trustees may need watch out for is where direction is switched to discretion. The Supreme Court is ruling on a case (‘Staveley’) where HMRC successfully claimed that a transfer from a S32 policy (where benefits would be paid to the member’s estate) to a personal pension plan (where benefits are discretionary) was tax avoidance as the member was terminally ill. Occupational schemes could see similar cases.

Sometimes trustees may find that their decision is contested. This is becoming more and more common. In fact, death benefit decisions now account for 10% of the Pensions Ombudsman cases, a threefold rise since the advent of pension freedoms when compared to the same period prior to 2015.

Raising awareness

Perhaps this is simply a case that large sums of money make it more likely that there will be an aggrieved party who has not received what they thought they should.

Or maybe it’s a lack of understanding of the benefits of discretion over direction. Does the expression of wish form do enough to explain the need for discretion to ensure IHT benefits? Does it explain sufficiently the loss of control to the member over decision making? How many members read the caveat that the trustees will usually follow the member’s wishes but are not bound to and ignore the last part. The key element of the discretion.

It is important that scheme administrators take the opportunity of regular member communications, such as newsletters, benefit statements and summary funding statements to remind members to keep their expression of wish form up to date. A form can be enclosed with traditional print communications, members can be directed to a website to download a form or prompted to contact the administrator by telephone or email.

The more up to date the member’s expression of wish form, the less likely it is that the trustees’ decision will be challenged and the member’s wishes can be fulfilled.

Alan Collins

The ultimate goal of a defined benefit scheme is clear – to ensure that all members receive the benefits they have built up in the scheme. For most schemes, this will involve some form of insured solution at a point in the future where remaining benefits are secured and the scheme is then wound-up. For some that will come sooner; for others it is currently a very distant prospect.

The UK funding regime has historically “ignored” this ultimate end point – rather, we have the somewhat vague construct of technical provisions (ongoing funding basis). This is the liability target required in funding valuations which must be prudent, but need not remove all future risks. Typically, you might see this liability target sitting in the region of 60-80% of the cost of insuring scheme benefits. Therefore, even if a scheme is 100% funded on the technical provisions basis, it will not be able to insure the benefits without significant further investment returns or significant further contributions from the sponsor.

As most of us working in defined benefit pension schemes already know, a scheme’s technical provisions are only a stepping stone towards the ultimate goal. What happens once full funding on an ongoing basis is achieved?

Over recent years, to assist scheme trustees with forward planning, the Pensions Regulator has introduced the concept of the long-term funding target (LTFT). The LTFT is defined as “the level of funding the scheme will need to achieve in order to reduce its dependence on the employer”. To me, this translates as meaning the buyout level funding or a level of funding that can be managed towards buyout without material further contributions from the sponsor.

The LTFT is now a key part of valuation discussions for 2019 and beyond. This is particularly the case for rapidly maturing schemes where the journey time to end point is getting shorter and shorter. The LTFT need not (and in most cases will not) bring about a change to the ongoing funding target or any immediate changes to the investment strategy. What it should do is bring about discussions on journey planning (both in the short and long-term), managing and reducing risk over time and possibly setting triggers that will reduce risk as the funding level improves and/or as the scheme matures.

Yields are returning to very low levels resulting in higher and higher liability values. As such, the funding challenges for pension scheme trustees show no sign of getting any easier. However, I am confident that looking to the future and setting clearly defined long-term targets (and clearly planning for how they will be achieved) will serve trustees well over the years ahead.

Alan Collins

The long-awaited Competition & Markets Authority (CMA) investigation into investment consultancy and fiduciary management has been completed and its final decision has been published.

All in all, to me, the CMA seems to have reached a pretty balanced assessment of the market and put forward some helpful remedies to the perceived problems. It is not the “all out attack” on the big three (and soon to be bigger in the case of Mercer) that some were hoping for (but, was never going to happen). Nor is it a full endorsement of all current practises and so some things will change.

The investigation focussed on two areas – investment consultancy and fiduciary management. To be clear, we provide both of these services to a number of trustee boards of defined benefit pension schemes.

The main findings of the investigation are that there is a low level of engagement by some pension trustees in choosing and monitoring their provider. The CMA also found that firms (like us) which provide both investment consultancy and fiduciary management have an “incumbency advantage” when fiduciary appointments are made.
The CMA also found that there may be high costs of switching providers and that many trustees find it difficult to access and assess information in relation to the fees of their existing fiduciary manager. My own experience is that the cost of switching investment consultant is often much lower than the costs of switching other services in our market (such as pension administration). Switching fiduciary manager may well be expensive due the potential costs associated with buying/selling investments, so the costs for these need to be understood as far as possible, before any switch is made.
I have also found the investment services market one of the more fluid areas of our industry, and one which is relatively easily accessible by new providers. I am further confident that all of our trustee clients have complete visibility and transparency of the fees paid and the services we provide.

So, what is the CMA going to do?

Following its investigation, the CMA is proposing to:

  • Require competitive tenders for first-time fiduciary appointments (or within five years, if the appointment was made without a competitive tender being undertaken);
  • Require investment consultants to separate marketing of their fiduciary management and to inform customers of the above tendering requirements;
  • Require fiduciary managers to provide better and comparable information on fees and performance;
  • Require trustees to set objectives for their investment consultant; and
  • Require investment consultants and fiduciary managers to report on performance using basic minimum standards.

All of the above seem to be reasonable requirements of trustees and consultants/managers. Indeed many schemes will already meet many or all of these requirements. My main concern is around the belief that “performance information” can be comparable. As stated in our response to the consultation, given the bespoke nature of pension schemes and the strategies put in place, applying a standard will prove difficult.

The report asserts that there is substantial confidence that a common standard could be implemented, but we still believe that it will be very challenging to agree a transparent approach to measuring performance on a standard basis. There is a real danger that a common standard will fail to identify genuine outperformance (or underperformance) and that it will actually drive inappropriate behaviour, as some providers might be tempted to adjust their strategies artificially. We will, of course, work within the parameters that emerge while sticking to our principles to achieve the best outcomes for clients, and we will be very interested to see how a genuine “apples vs apples” comparison standard can be put in place.

Alan Collins

It did not take Holmes-ian powers of deduction to pick up the influence of recent corporate failures in the Pensions Regulator’s annual funding statement that was issued on 5 April.

The annual “state of the nation” address on funding of Defined Benefit Pension Schemes made clear the disquiet from the Regulator that dividend payments were increasing but deficit contributions were not. The statement stresses the need for trustees to ensure “fairness” for their schemes relative to corporate shareholders/stakeholders. Where employers are strong, trustees should be “looking to fix the roof while the sun is shining” if you like. The Regulator has (pleasingly) avoided the temptation to try and fix parameters against which trustees should judge fairness. The current regime is founded on flexibility and I do hope this continues. Recent implications (in the Government’s White Paper) that greater direction/restriction is coming has me fearing a return to the days of a set Minimum Funding Requirement. The last attempt at MFR didn’t work and was quickly swept aside. I suspect that any attempt to turn back the clock on this would meet a similar fate.

There was also a reminder that dividends are not the only target, with the introduction of what might become a buzz-phrase – “covenant leakage”. This is really a catch-all phrase to describe any route by which the security of the scheme’s position is damaged by corporate activity. For me, this points strongly towards trustees drawing up and monitoring some key indicators to monitor company performance and company strength and take action to prevent deterioration or react swiftly if there is a change. And remember, it can be just as important for trustees to react when their sponsor’s position improves, allowing the scheme to share in this success and put their scheme on to a stronger footing.

The statement contained further “hints” that some trustee boards are not sufficiently well-equipped to tackle complex funding and investment issues. Trustees are expected to seek appropriate advice, especially where the board does not have the sufficient expertise or where potential conflicts exist.

Many other themes in the 2018 statement were follow-ons from 2017, such as the prominence given to the importance of contingency planning.
One part I struggle with is the continued highlighting of “Brexit uncertainty”. Yes, we know there is uncertainty. However, if the Government doesn’t know what is going to happen, the markets don’t know what is going to happen, advisors don’t know what is going to happen, then what chance do trustees have? I fear that trustee resources could be diverted in speculative discussions about future scenarios rather than focussing on more measurable, controllable risks.

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