Pension Insurance Corporation research: Pension fund trustees expect to increase required contributions

More than half (55%) of pension fund trustees expect to increase the contributions they require from their sponsor following the next valuation by more than 10%.

The Future of Pension Funds 2011 by the Pension Insurance Corporation, which surveyed occupational pension fund trustees, also found that 11% are planning to increase contributions in excess of 20%.

Additionally, 70% of trustees do not believe fund assets are well matched with liabilities. The majority (85%) of trustees are happy with their investment advisors, while 93% are happy with their actuarial advisors.

David Collinson, co-head of business origination at Pension Insurance Corporation, said: “Employers have already experienced significantly increased contribution requirements after worse than expected triennial valuations over the past couple of years. This trend seems set to continue.

“The fact that many funds have not fully matched their liability risks only heightens the chance that further increases to contributions will be needed from the sponsor in the future.

“Although the up-front cost of insurance may seem significant to many trustees and sponsors, the key point for them to bear in mind is that it brings certainty.

After all, there are no guarantees that even the current high level of contributions will be adequate in the future, particularly if funds have not matched their assets to their liabilities.”

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