Pensions Regulator challenges industry to ‘try harder’ on risk management

Pensions Regulator challenges industry

The Pensions Regulator today issued a 46 page guidance document on integrated risk management. The focus of the guidance is the key financial risks for defined benefit schemes, i.e. funding, investment and employer covenant.

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The Pensions Regulator today issued a 46 page guidance document on integrated risk management.  The focus of the guidance is the key financial risks for defined benefit schemes, i.e. funding, investment and employer covenant.

Mike Smedley, Pensions Partner at KPMG commented:“The concept of integrating funding, investment and covenant risks is not new.  But the Regulator has decided that the industry has not gone far enough and wants to raise the bar.

“The guidance illustrates a very detailed and comprehensive risk process, with strong encouragement for Trustees to establish, document and implement an integrated approach to risks.  While there are nods to the need for proportionality - presumably for smaller or less well-resourced schemes - there is an expectation that spending more time and money up-front will pay off in the long run.

“For some schemes this will be business as usual, but for many following the guidance in full will create significantly more work.  Implicitly the pensions industry is criticised for being too disjointed across these key areas – with some advisers perhaps guilty of one-dimensional advice and some Trustees lacking the resources to integrate them.  But inevitably many Trustee boards are reliant on advisers and will face a tricky question of which adviser has the right skills to help them join the dots.”

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