Forty-three per cent of pension schemes do not have an overall risk-mitigation strategy, finds HamishWilson in the second round of results from its recent pension fund survey.

Almost 90 per cent of schemes admitted that they need to do more on risk management, and of these 43 per cent do not have an overall strategy.

"Risk-mitigation must start with a thorough understanding of the sponsor's (and trustees') objectives and timescales," commented John Branford, partner at HamishWilson. "All actions should then be consistent with the strategy.

"The danger comes when a piecemeal 'flavour of the month' approach is adopted rather than a more vital holistic angle. For example, if a scheme has an objective to buy-out in five years' time, a longevity swap, whilst 'fashionable', would not be appropriate as it would have to be unwound, which would be messy and costly. However, an enhanced transfer value exercise would make good sense as it can reduce the cost of the buy-out and result in a 'win-win' situation between the sponsor and scheme members."

Branford added that a "holistic" approach means trustees are more likely to work with an employer when they understand what it is they wish to achieve.

The survey aims to establish the main issues bothering trustees and employers when it comes to defined benefit (DB) schemes, and in the longer-term plans to address those concerns.

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