Pension trustees are increasingly concerned about cyber-risks, the threat Brexit presents, and the prospect of a dramatic market correction, according to new research.
Trustee and governance services provider PTL has published the results of its quarterly DB Risk Survey. This asks respondents to list the top three risks facing DB pension schemes.
The survey shows that risk cited by most trustees was the employee covenant risk, this was followed by Brexit investment implications.
Longevity increases continue to be mentioned, but this “score” has already halved, when compared to a year ago.
PTL managing director Richard Butcher says: “The longevity risk score ticked up a little [this quarter], but that’s in the context of it already being half what it was a year ago.
“The indicators that life expectancy is flattening and even reducing could, of course, have a significant impact on DB schemes where, roughly speaking, a one-year increase or decrease in life expectancy can change liability values by 4 per cent.”
He points out that trustees are becoming increasingly aware of the complexity and difficulty of keeping systems secure. Far more trustees now cite this as a risk, when compared to a year ago. He adds: “While a pension scheme may not be the obvious target for a cybercriminal, we do hold large amounts of data and personal information.
“Member privacy and security is paramount, so we really cannot be complacent.”
He adds: “In the meantime, 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.”
He points out that the survey also identified an emerging category of investment risk which seems to encompass 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. As we enter a new quarter and soon a new year, we’ll be looking to test this further.”
