The Problem Statement
Pension funding is bringing new reputational, governance, finance and accounting problems to Boardrooms. 2018 Government actions and regulatory changes have raised the stakes.
The mix of low interest rates and the derisking of investment returns is recognised as causing issues. Now, the funding targets set for schemes under the Pension White Paper are to move to self-sufficiency and buyout. Unless asset returns deliver the extra money, corporates will be paying considerably more in cash than their accounts suggest.
Further, the “Stronger Pensions Regulator” can cut across corporates’ dividends, leverage and transaction plans. The powers are backed with reprimands, fines and criminal sanctions. Reputational risks for directors and trustees have increased considerably. Corporate governance processes will need to give executives clear guidance for the thankless task of reaching agreement with trustees and the Regulator.
With higher financing targets coming, accounting rules will soon catch up and cause balance sheet and profit hits.
Corporates can respond positively to the problem and move decisively to a defensible position.
The Action Plan
C-Suite Pension Strategies has the ideas and the actuarial and insurance sector contacts to make implementation possible