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27 May 2015

Global lessons
in simplifying pension risk

LCP welcomed clients and its network partners from around the world to its annual Global Pensions Forum (21 May). Speakers from LCP’s international network, Interserve plc, Environment Agency Pension Fund (EAPF) and Legal & General Investment Management (LGIM) gathered to discuss the different ways that pension schemes might simplify pension risk.

Conference chairman, LCP partner Alex Waite, commented: “The sustainability of pension schemes is a crucial issue for sponsors and members across the globe, and assessing and mitigating risk is a huge part of that. The speakers provided plenty of food for thought, and actions for the next 12 months that will help secure the viability of pension schemes in the future.”

Delegates took part in an interactive poll canvassing their views on the biggest risk facing them at the moment with their pension arrangement, with “employees not having sufficient funds to retire” being the most popular response.

Tim Haywood (Group FD & Head of Sustainability at Interserve plc) provided insight into what sponsors are doing in this area. When aiming for sustainable solutions that work for employees, trustees and sponsors, Haywood commented that sponsors should not be afraid to do preparatory work upfront on technical matters, such as detailed accounting issues, so that they are prepared to take advantage of innovative opportunities when they arise.

The conference also covered a number of key topics for company sponsors of pension plans:

  • LCP’s Myles Pink demystified longevity risk, discussed the driving factors behind this growing market, and the opportunities over the coming year;
  • LCP’s Aaron Punwani investigated the increased regulatory scrutiny of European pensions legislation, and encouraged delegates to use the new reporting framework to develop a holistic risk management strategy that can align the pension risk profile to the objective of the sponsor, and avoid nasty surprises;
  • Faith Ward (EAPF), Meryam Omi (LGIM), Tim Haywood (Interserve) and Claudio Rodarte (Rodarte Nogueria, Brazil) joined LCP’s Claire Jones in a panel discussion to ask why pension funds should care about sustainability – with three-quarters of attendees in a poll conducted at the conference believing that Environmental, Social and Governance (ESG) issues should be given greater importance in pension schemes; they suggested taking the following immediate actions for trustees and sponsors:

Read the Law Commission’s guidance on fiduciary duty;

Agree a consensus view on ESG issues and how they should be taken into account;

Consider your approach to ESG issues when choosing investment managers;

Include ESG issues in investment mandates so there is a clear instruction about what needs to be done; and

Monitor what your investment managers are doing in this area.

  • Now that Freedom & Flexibility is a reality, Net Actuary’s Brian Bendzulla and LCP’s Carla Lakey looked at what the UK can learn from experience in Australia and more globally.

Feedback from one delegate summed up the mood: “This was a very good and thought provoking event, with a high standard of speakers and panel members.”