Aon has found that pension scheme trustees are overburdened
OREANDA-NEWS. Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has found that pension scheme trustees are overburdened and that changes are needed to decision making processes to ensure that trustees have sufficient capacity to make decisions and to respond to risks and opportunities.
Data collected over the last year at Aon’s Pension Conferences and subsequent events - tracked the extent to which representatives of pension schemes agreed with 12 ‘self-assessment’ statements, evaluating where they stood on issues such as decision making, roles and responsibilities, and opportunities and strategy.
The results of this research show that trustees (both in defined benefit (DB) and defined contribution (DC) schemes) are aware of the need to innovate and to tackle inefficient decision making which slows their ability to respond to risks or opportunities:
• nearly 70% of respondents agreed that decisions sometimes take months from being raised to being implemented, while well over half of respondents felt that the same issues were discussed at multiple meetings
• less than a third had a business plan with SMART (Specific, Measurable, Achievable, Realistic and Time-bound) objectives and a strategic focus for their pension scheme;
• over 60% of respondents agreed that it is often difficult to find enough time at short notice to give appropriate consideration to new opportunities; for example, nearly two out of three respondents acknowledged that they would not be able to take advantage of attractive short-term buyout prices.
Aon Hewitt has published its findings from the initial research in in a paper titled ‘Time to focus on getting things done’. In this, trustees can find an overview of the results as well as some tips and possible solutions to these issues. Recommendations include organising a pension scheme so that trustees are best able to ensure:
• that the right decisions and actions are taken and that they happen at the right time;
• that the right people make those decisions and take those actions (that they have the right skills to do so, and that they would not be better done by others);
• that the right information and advice is available to feed into that process; and
• that all of the above is focused on getting the right results in line with the long-term objective, for instance, of achieving Pensions Stability.
Based on its research, Aon has also developed a more formal approach for pension schemes to assess their structures and decision-making processes and to ensure they are making the best use of time and opportunities in meetings. The full assessment involves all trustees completing a questionnaire which is then analysed and discussed. However, a flavour of the issues covered, and a quick self-assessment, is available online through the Aon Governance Challenge.
Paul McGlone, partner at Aon Hewitt, said:
“In an environment where opportunities can be transient - particularly in the investment and risk settlement markets - delays and indecision can lead to missed opportunities. This can result in an increase in the journey time to full funding and the risks that schemes continue to face along the way. Inefficiency increases the chance that these opportunities are missed.
“For many schemes the need for change in how they operate is already recognised, and making changes to their governance and decision-making processes now, could have a real and long-lasting impact on the issues that their scheme is facing.”