Nearly 51 per cent of chief financial officers (CFOs) are entirely unsure how a potential surplus would impact their future objective for the scheme, according to Cardano.
The research also shows that 89 per cent of CFOs from companies of all sizes are unclear about their company’s potential access to a future pension surplus while 51 per cent are entirely unsure how a potential surplus would impact their future objective for the scheme.
According to Cardano, the research, which is based on responses from 227 UK CFOs and senior executives in charge of their company’s defined benefit plan, is released at a time when businesses are facing more difficulties due to better funding positions and expanding pension surpluses.
Moreover, 70 per cent of CFOs say they are unsure of the ultimate purpose of their defined benefit (DB) pension plans. Of them, 51 per cent are consulting outside experts to ascertain the ultimate goal of their projects, whereas only 19 per cent are not consulting anyone.
Furthermore, 72 per cent of CFOs think their DB pension plan is in good financial health. Of them, 56 per cent say their plan has surpassed its long-term financial goal, and 16 per cent say they are very close to or have reached a buyout surplus.
Cardano Advisory head of corporate advisory services Sinead Leahy says: “We are surprised by the level of uncertainty expressed by CFOs in our report. The findings clearly show a wide range of outcomes playing out a year after the crisis causing many to pause and think about their future pension strategy.
“While it is great to report the majority of schemes are in good financial health, many corporate sponsors clearly would welcome more support in determining the right endgame. There is a lot to think about and the market continues to evolve. Even those considering buyout need to manage this carefully in view of a key consequence of the crisis which is the imbalance which still exists between liquid and illiquid assets in pension scheme portfolios.”
Cardano Advisory senior director Nick Gibson says: “Sponsors and their DB pension schemes have undergone unprecedented change over the last 12 months. From decades of deficits, we are now seeing an increasing number of schemes finding themselves in surplus, or at least on track with their long-term funding targets.
“However, our findings show that for the most part, CFOs are unsure about what this new world means for their pension schemes. There is a clear sense of wanting to exercise greater influence over their schemes. The relationship between CFOs and their schemes is about to become a lot closer as the endgames become more defined and their conclusions near.”
