Employers Taking an Active Role in Pension Scheme Investment Strategy
24 Feb 2016

​Employers are getting more hands-on in setting the investment strategy for the schemes they sponsor, with 69% saying they now take a more active role, according to research published today by Punter Southall.

The Group’s latest scheme funding survey* – undertaken every three years among trustees and corporate decision-makers – reveals the extent to which employers are going above and beyond the legal minimum, which only requires that employers should be ‘consulted’ on investment matters.  One in six (17%) respondents to the survey said that the employer took the lead in discussions on investment strategy, countered trustee proposals with their own or put forward their own views in advance of trustee proposals. The employer is more likely to play a leading role when a larger scheme is involved: 25% of respondents representing 5,000+ member schemes say that they did so.

Employers and trustees are increasingly collaborating during the valuation process

The research also points to evidence of greater collaboration between sponsors and trustees during the valuation process.  Only 1 in 5 respondents were less than satisfied with negotiations with the trustee or employer in 2015, compared to 1 in 3 in the 2012 survey who found the process problematic.

This development has been welcomed: collaboration between the trustees and employer was spontaneously highlighted by 27% of respondents as a factor making a positive difference to the valuation process. Other significant factors included the quality and clarity of advice and information from advisers (20%) and clear communication, transparency and sharing of information between parties (18%).


Figure 1: Factors making a positive difference to the valuation process (%)

Scheme Funding Survey Figure 3.jpg

The adoption of new technology is a trend which looks set to continue. Four in ten (41%) schemes are now using a ‘real time’ valuation tool and a further one in five (20%) feel they would benefit from having access to that type of resource.

40% of schemes already have a fully documented integrated risk management plan

The survey found that only four in ten (40%) schemes (rising to 46% for schemes with 5,000 or more members) have a fully documented integrated risk management plan, which the Pensions Regulator’s latest guidance describes as part of good scheme governance. One in nine (11%) survey respondents report that they do not look at risks within their scheme in an integrated manner at all. 

One in eight (13%) schemes does not currently use any methodology to assess risk, and this picture alters in proportion to the size of a scheme. One in four (26%) schemes with less than 1,000 members – twice the survey average – do not use any risk assessment methodology.

Jane Beverley, Principal and Head of Research, Punter Southall, said: “It is important that both trustees and employers have a clear understanding of the other’s objectives and risk appetite. Sharing information using technology platforms can speed up and improve the valuation process.

“The Pensions Regulator’s Code of Practice and guidance on integrated risk management encourage trustees to place more focus on risk assessment. Trustees should be asking their advisers to explain the merits of the different approaches to risk assessment that are available, and how each methodology adds to the picture.  They should also consider setting down their integrated risk management plan in a formal document.”

Craig Wootton, Principal and Head of Employer Consulting, Punter Southall, said: “It makes sense for employers to actively volunteer their views on investment strategy as they ultimately bear the cost and risks. Rather than being steered to automatically focus on “de-risking”, they should be driving and putting forward the “right level of risk” for them within the context of the future size of the scheme and the prospects and strength of the employer.”

* The Punter Southall survey was conducted between September and November 2015 with responses from 130 trustee and corporate decision-makers

To receive a copy of the Scheme Funding Survey Click here