There is yet more woe for defined benefit (DB) pension schemes with evidence of a disconnect between trustees and scheme sponsors' risk management priorities, warns MetLife Assurance Limited.

A difference in the approach taken by trustees and sponsors to risk could hinder the efforts made by schemes to develop and implement holistic risk management solutions, shows a new report from MetLife.

The UK Pension Risk Behaviour Index warns that this disjointed approach can cost a DB scheme money, waste trustee and management time and potentially cause harm to the scheme sponsor's reputation.

"Without an understanding of how all of the various pension risks impact the scheme as a whole, trustees and sponsors should not believe that they are adequately managing the risks their schemes face," commented Dan DeKeizer, chief executive officer at MetLife Assurance Limited. "Unless strong risk management strategies are implemented, both pension scheme sponsors and trustees could run the risk of failing in their number one task of protecting member benefits.

"A truly holistic view of risk management on the part of both trustees and scheme sponsors requires both sides to fully assess and prioritise all risks, even those for which they are not primarily responsible. Our inaugural study should encourage scheme sponsors and trustees to communicate regularly about a full range of issues that affect their schemes, especially as they face increasing risks ranging from the quality of member data to scheme governance and the employer covenant."

Trustees are primarily preoccupied with investment-related risks, while scheme sponsors place more emphasis on liability and business risk factors.

Emma Watkins, head of relationship management at MetLife Assurance, added: "At a time when trustees and scheme sponsors need to be more vigilant than ever in identifying the short and longer-term risks associated with their DB scheme, this inaugural study serves as a benchmark against which future risk management attitudes and perceptions can be measured. We hope it becomes a useful tool for scheme sponsors and trustees as they explore risk management strategies with one goal in mind - protecting member benefits."

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