Pension trustee governance models are out of date as they discourage swift decision making and so harm scheme prospects.

The stark message comes from Mercer's European Investment Forum, where the financial consultancy firm carried out research among it 240 attendees.

83 per cent of delegates said that they felt the current trustee governance model is out of date and more than a third believe that slow decision-making is the greatest challenge that pension funds face. 45 per cent said it could be improved by outsourcing some aspects of scheme management.

Tom Geraghty, European head of Mercer's investment consulting, said that the financial crisis had shown how "traditional" governance structures can slow down a pension fund's response to market changes and so "result in considerable losses".

"A more dynamic governance model, which might involve delegation of some decision making and implementation responsibility, is emerging as a more practical solution for some clients," he said.

The survey also found that de-risking techniques were in place in 27 per cent of attendees' practices, and a further 52 per cent are considering using options such as liability driven investment (LDI). "Pension fund investors now realise they can't agree a three-year investment strategy and then just sit back and watch it play out. Both investment strategies and governance structures should be assessed on an ongoing basis to get the best performance from the portfolio."

Attendees at the forum were made up of pension fund representatives, investment managers and consultants.

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- Pensions Age June 2009

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