Funding deficits are the most important risk to UK defined benefit (DB) pension schemes, according to a comparison report by MetLife Assurance.
The annual US/UK pension risk behaviour index, which compared pension risk attitudes and aptitude in the UK and the US, found that 58% of respondents in the UK chose funding deficits as the most important risk, while only 1% chose inappropriate trading.
The report surveyed plan sponsors in the US, and scheme sponsors and trustees in the UK on 18 investment, liability and business risks to which their schemes are exposed.
In the US, the most important risk factor, selected 66% of the time, was the underfunding of liabilities, and the least important risk factor, early retirement risk, was selected 4% of the time.
Asset and liability mismatch ranked third in the UK and second in the US.
In the UK, 80% of scheme sponsors and trustees said they are successfully managing risks facing their plans, and 79% of plan sponsors in the US report the same.
Cynthia Mallett, vice president, corporate benefit funding at MetLife, said: “While plan sponsors in the US and scheme sponsors and trustees in the UK are both focused on liability management, there are key differences in their approaches.
“Our research shows that UK respondents may be more concerned about securing contributions to their scheme in order to meet their obligations, whereas US plan sponsors are more concerned about seeking excess returns from their assets to meet their liabilities.
“This marks a fairly significant turning point in the US away from seeing absolute asset performance as a key driver of meeting pension obligations, and moving to managing assets in the context of plan liabilities.”
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