As many as 43% of pension fund schemes have no overall risk-mitigation strategy, research by HamishWilson suggests.
In its survey of 171 schemes, ranging from under £50m of assets to over £1bn and from 60 to 325,000 members, almost 90% recognise they need to do more on risk management.
Of these nearly half (43%) lack an overall strategy to manage risk, according to the survey of trustees' and employers' main concerns relating to existing defined-benefit (DB) plans.
John Branford, partner at HamishWilson, says understanding sponsors' and trustees' objectives and timescales are key to risk-mitigation.
He says: "The danger comes when a piecemeal ‘flavour of the month' approach is adopted rather than a more vital holistic angle. If a scheme has an objective to buy out in five years' time, a longevity swap, whilst ‘fashionable', would not be appropriate as it would have to be unwound, which would be messy and costly.
"However, an enhanced transfer value exercise would make good sense as it can reduce the cost of the buyout and result in a ‘win-win' situation between the sponsor and scheme members.'
Branford adds: "Not forgetting of course, on purely practical grounds, a holistic approach means trustees are more likely to be able to work with the employer if they understand what he wishes to achieve."
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