Over half of pension schemes do not know how their funding position has been affected by the recession, despite over 60 per cent of them receiving quarterly or more frequent updates from actuarial organisations, according to Punter Southall.

An in-depth survey by the firm of over 120 pension schemes questioned trustees, corporate sponsors and pension managers about their experiences of the new scheme funding process, also found that trustees are getting a better deal under the new regime.

However, there is evidence that there remain significant gaps in trustee knowledge, particularly when it comes to the financial downturn. This could be exacerbated by the additional revelation that employers

Jane Beverley, principal and head of research at Punter Southall said that the survey has pointed out some important lessons for those about to embark on their second funding valuation.

"Working collaboratively is key: trustees and employers should recognise the fact that changes in employer covenant and funding deficits are likely to complicate their funding negotiations next time round, and so should adopt a collaborative approach to the valuation as soon as possible," she said. "We would recommend that trustees and employers review their experience of the first valuation with their advisers to see what lessons can be learned to improve the process."

Negotiations are expected to become harder due to the potential for employers to become more aggressive because of the financial situation, and almost a third of respondents believe this could be the case.

Punter Southall has made eight recommendations to pension schemes in response to the findings of the survey. They believe trustees and employers should begin conversing on the next funding valuation as soon as possible, that trustees should monitor the funding position and have an active governance framework in place, and that they should review the lessons learned from the first time round, perhaps looking at additional training before the next scheme funding valuation. Trustees and employers should also consider funding and investment decisions in tandem and give further consideration to investment and de-risking strategies. Employers should look at taking independent actuarial advice for the second funding valuation, and consider training on the funding process.

- Pensions Age March 2009

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