Pension fund sponsor contributions likely to rise

Pension fund sponsor contributions likely to rise

Pension fund trustees are likely to increase sponsor contributions by more than 10% following the next valuation, according to a survey conducted by UK risk management specialist Pension Corporation.

The survey, ‘The Future of Pension Funds 2011’, found that 55% of trustees thought it was likely sponsor contributions would rise by more than 10%, with 11% looking at potential increases of more than 20%.

Other key points of the survey included the finding that 47% of trustees are unsure if their assets would cover Pension Protection Fund benefits in the case of sponsor insolvency within the next five years. In addition, around 70% of trustees do not believe their assets and liabilities are well matched.

“Employers have already experienced significantly increased contribution requirements after worse than expected triennial valuations over the past couple of years,” says David Collinson, co-head of business origination at Pension Insurance Corporation, the buyout arm of Pension Corporation. He expects this trend to continue, and sees sponsor contributions to continue to rise, as he says many funds have not fully matched their assets to their liability risks.

 “Although the upfront cost of insurance may seem significant to many trustees and sponsors, the key point for them to bear in mind is that it brings certainty – there are no guarantees that even the current high level of contributions will be adequate in the future.”

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