Can your scheme and sponsoring business
weather the pension storm?

Our viewpoint

Although we’re only into February, 2018 has already been an eventful year in pensions.  Amongst profit warnings from Capita, and volatile financial markets, Carillion has grabbed headlines. 

We hear of Carillion paying increasing dividends whilst its pension deficit also grew.   Similarities with the recent BHS case are also drawn.  Frank Field’s parliamentary select committee raced into action to investigate Carillion and they have already interviewed many of those closely involved with the pension scheme and scrutinised and publicly shared a number of pieces of past advice.    

We await the Pension Regulator’s turn in front of the select committee shortly – they have been involved with the scheme over the past decade but not used their powers to enforce any action.  Against this backdrop, 2018 may well see more use of power by the Regulator and perhaps the White Paper due in the Spring will give them further powers still?      

But how well would your scheme and your sponsoring employer stand up to this level of scrutiny?  Now is a good time to step back, take stock and consider what you are doing to effectively manage your pension risks, and what actions you might take over 2018. 

We’ve put together a top 10 list of questions you might want to ask yourself to understand if your scheme and business can weather the pension storm. From ‘How strong is your employer covenant?’ to ‘What contingency plans have you got in place’

All ten questions can be seen here.

Answering these questions will help you to ensure the plans you have in place, or are going to develop, will help you to react and remain on track to achieve your objectives by:

  • Helping you understand how robust your existing plans are;
  • Allowing you to identify any areas that could be strengthened; and
  • Using this insight to determine whether any of these should be on the agenda for the next year, the next valuation or the next investment strategy review.

The latest pension regulations from the EU will raise the bar further in terms of risk management.  UK schemes are likely to need to comply with IORPII from January 2019 - so it also makes sense to develop your risk management with this in mind. This considered approach will also help you assess whether you have met the Pensions Regulator’s expectations for schemes to have an “Integrated Risk Management” approach to managing their risks. 

Do you fully understand the risks faced by your scheme and have plans in place so you know what actions you will take if risks materialise?  How would you stack up if you were in Carillion’s shoes and in front of the select committee?  Pensions can be a factor in the success or failure of a business, so it’s well worth the employer and trustees working together to get risk management right.