Accounting
Avoid uncertain pension scheme liabilities risk |
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| Accounting | |
| Written by Catherine Murray | |
| Thursday, 26 August 2010 | |
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Employers underestimate risks associated with poor defined benefit membership data. A leading employee risk and benefits management firm is encouraging employers to review their data and address any issues to mitigate the risk of uncertain scheme liabilities. Most UK employers operating defined benefit pension schemes are underestimating the risks and failing to understand the impact of poor quality membership data. Over three-quarters of UK employers (76%) say that the quality of membership data is either of very low or low risk to their pension arrangements, according to research from Aon Consulting. The survey also reveals that 35% of employers consider future unknown liabilities of high or very high risk and 46% perceive certainty of value placed on scheme liabilities as a high to very high risk to their business. Uncertain scheme liabilities are a major consequence of poor quality membership data, so these results, when viewed alongside each other, suggest that employers are failing to understand the dangers of not keeping their data in order. The findings come from Aon’s latest Employer Survey, which asked businesses a number of questions relating to their pension schemes and associated risks. Other key findings from the research found:
Ian Bloxham, Client Relationships & Development Director at Aon Consulting said, "Despite recognising unknown future liabilities and uncertain liability valuations as high risk, employers are failing to recognise the level of risk associated with the quality of their membership data." "This is in spite of the firm stance which The Pensions Regulator is now taking in relation to pension scheme record keeping," he said. Bloxham continued, "Poor membership data carries a risk of unidentified liabilities emerging in the future bringing uncertainty into scheme funding decisions. Insurers require reliable, accurate data when pricing risk reduction programmes." "Data quality can have a significant effect on price. Indeed effective management of your scheme data can potentially save many millions of pounds when sourcing a buy-in or buy out policy," said Bloxham. |
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