Trustee concerns over Brexit investment implications continue to grow

The number of trustees that believe that Brexit investment implications are the top risk to DB pension schemes continue to increase, according to data from PTL.

In its fourth quarterly DB risk survey published today, 7 November 2018, PTL found that on aggregate 16.95 per cent of trustees believe Brexit investment implications are the biggest risk to their scheme.

This is compared to 13.79 per cent in May 2018 and 10.95 per cent in September 2017.

However, employer covenant risk remained the highest-rated DB risk amongst trustees, with an aggregate of 24.29 per cent of trustees naming it as their greatest concern.

Despite this, the number of trustees naming it as their top risk fell from May 2018, when the figure was 27.59 per cent.

Brexit investment implications were the second biggest concern, followed by cyber security, which increased up to 11.3 per cent in October 2018 from 10.92 per cent in May 2018.

PTL managing director, Richard Butcher commented on the findings: “Brexit and its impact on investment is an increasing risk for trustees. While this may not be surprising, it’s quite difficult to see how the risk can be materially and meaningfully mitigated, we are in the land of the unknown when it comes to Brexit.

“In the middle of the table cyber risk has ticked up too. This may be because trustees are becoming increasingly aware of the complexity and difficulty of keeping systems secure. While a pension scheme may not be the obvious target for a cybercriminal, we do hold large amounts of data and personal information.”

PLT’s survey also highlighted growing concerns surrounding GMP equalisation, as its aggregate score rose from 5.17 per cent in May 2018 up to 8.47 per cent in October 2018.

Furthermore, 6.21 per cent named “change of government”, a newcomer to the survey, as their top DB scheme risk, while worries over longevity increased rose slightly to 7.91 per cent, although this was still significantly lower than the aggregate 14.6 per cent naming it as the top risk in June 2017.

Butcher added: “There is also an emerging category that seems to be more than just Brexit fears. We had a few comments in the “other” category that could be grouped under the heading “total investment market correction” – an unmitigated, correlated collapse. This seems to indicate a general nervousness about the markets and about the world.”

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