Maggie Williams explores the key findings from our professional trustee survey asking respondents what the biggest issues in scheme management are

We spoke to 72 independent trustees to find out what were the biggest challenges when it came to scheme design? Here’s what we learnt:

● The strength of the employer covenant, the persistence of low real yields and improving funding levels are the three biggest challenges facing DB schemes at present.

Exec summary - scheme management

● To address those challenges, trustees expect to use liability-driven investment strategies (61% expect to implement this), income-focused strategies (51%), fiduciary management (48%) and alternatives (41%).

● The majority of respondents (75%) believe that most DB schemes are targeting buyout in the long term. However, they do not believe that it should be made easier to offload or reduce DB obligations if the sponsor is struggling.

● Local Government Pension Scheme (LGPS) pooling received mixed reviews from respondents, with 42% saying the move is generally positive. Some trustees commented that there are parallels with DB provision and 64% said that small schemes should be encouraged to consolidate.

● For DC schemes, member engagement and communications is independent trustees’ greatest area of concern, with 23% of respondents citing this as the single biggest challenge for the schemes that they work with. Appropriate default fund design (20%) and adapting to regulatory change (16%) are other key issues for trustees working with DC schemes.

To download the full Independent Trustee Research Report 2018 click here.

This research was carried out in association with Newton Investment Management.