Gulf of expectation between trustees and employers on wind-up says Aon

Four out of five trustees predict that their defined benefit pension schemes will still exist in ten years, despite half of employers predicting scheme wind-up within the next decade, says Aon Consulting.

Figures from Aon, based on a survey of over 250 trustees of DB schemes found just 20 per cent of trustees thought their scheme would be wound up within a decade, while over half, 52 per cent, thought that the scheme would last in excess of 20 years.

The results are in stark contrast to the expectations of employers, as measured by Aon’s most recent employer survey in 2007. That survey showed that 50 per cent of employers expect their DB pension scheme to be wound up within ten years.

Aon says the conflict in expectations suggests a significant communication gap between trustee boards and sponsoring companies. It suggests that whilst it seems to be a priority for sponsors to minimise or remove the effect of pension schemes on their financial results, this is not acknowledged by trustees. When asked to rank the importance of issues facing their pension scheme, trustees ranked pension scheme wind-up as the least important issue.

Paul McGlone, principal and senior actuary at Aon Consulting said: “It is worrying that there is such a large expectation gap between trustees and employers over the longevity of pension schemes. It is fundamental for trustees and sponsoring employees to have a shared view as it impacts on how all of the big issues affecting pension schemes are addressed.

“Without a commonly shared-view, there is unlikely to be agreement over actions, and there is a danger that one party takes decisions that are a hindrance to the other. We recommend that that both parties should always take steps to agree shared expectations about the pension fund lifespan.”