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Better governance needed to improve pension shortfalls
The head of client consulting at Watson Wyatt, Martin Goss, has called for better governance and improved structures in global pension funds to fix shortfalls in pension balance sheets. Pension funds contracted by 29 per cent globally in 2008 and 2 per cent in Australia.
“Pension fund trustees now face a more complex environment for decision making, with new developments in the risk, regulation and investment landscape. It appears that the margin by which the time and expertise of pension fund trustees potentially falls short of what is required has grown larger. This [makes a case] for new initiatives in governance resources and structure,” Goss said.
“Severe market events last year put the global pensions balance sheet under greater pressure, forcing solvency levels for many funds to unprecedented lows,” Goss said.
“This will mean that many defined benefit funds globally will have to consider a number of options — extra contributions from sponsors, contingent funds arrangements, investment strategy reviews and hedging strategies, not to mention changes to benefits structures,” he said.
“Stronger governance is critical for pension funds to bounce back in 2009,” Goss said.
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