Too many employers are still getting advice from the same source as their pensions trustees and this could be putting their business at risk, according to a new report.
Up to 44 per cent of employers still use the same firm of actuarial advisers as their trustees, despite the separation of responsibilities achieved through legislation in recent years, the report by PriceWaterhouseCoopers found.
Many of them are turning for advice to the same individual and, as a result, employers could find that risks are being either under or overstated or that alternative methods of
structuring, which may be more beneficial to the business, are not being fully explored.
Alan Pentland, director and pensions specialist at PricewaterhouseCoopers in the Midlands, said: "A growing number of employers and trustees are recognising that using the same firm of advisers is increasingly hard to justify and, in some cases, risky. More employers are choosing to appoint independent firms.
"The main reason for this shift is that employers and trustees are increasingly finding they have conflicting objectives - the employer wants to do what is best for the business but the trustee needs to do what is best for members.
"By having a dedicated independent adviser, businesses may find it easier to assess the risks associated with their schemes more fully; consider alternative structuring to ensure funds can be released should surpluses occur in the future and take full advantage of the tax simplification following A-day."
According to the survey, only about a third of larger employers and about one in five small and medium-sized businesses that operate direct benefit (DB) schemes, have one that is still open to new employees.
Despite this, there is a growing consensus between finance, HR and pensions professionals that pensions are an important part of the employment deal. About a third of participants say their company pension offering has become more important for attracting senior executives and other staff over the last three years.
Mr Pentland said: "If pensions continue to become more valued as a recruitment tool and magnet for talent, this may represent something of a lifeline for ailing DB schemes and we may even see more of them being restored for new employees."
The survey also revealed that employers are increasingly interested in contingent funding, as an alternative to paying cash directly into a pension scheme. This usually involves putting things like property or letters of credit into 'reservoir' funds, over which both the sponsoring company and trustees share a degree of control.
In this way, money that is potentially useful to a company can be recovered if the pension scheme moves into surplus, as is looking increasingly likely for some.
Eight per cent of companies have taken this route in the last two years but over the next 12 months a further 16 per cent expect to allocate contingent assets to their pension scheme and a further 23 per cent are undecided.
Mr Pentland added: "While many businesses have had their fingers burned in recent years due to the widespread failure of company pension schemes, many of which have suffered large deficits, there are signs that businesses are once again considering pensions as an important investment vehicle."