Final salary pensions pose second biggest risk to employers

Final salary pensions have risen to second place in the list of corporate risks, ranking only behind the market environment. 

According to Aon Consulting’s latest Employer Survey, 41% of respondents said pensions were a key business risk compared to a quarter in 2008 when the study was last conducted.

However, just under half (48%) of businesses say they do not derisk their pension schemes. 

Marcus Hurd, head of corporate solutions at Aon Consulting, said: “While it is encouraging employers have woken up to the scale of risk posed by their final salary schemes, the findings underline there is plenty more they can do to take a proactive approach to mitigating risk.

“A first step for all schemes is to assess the magnitude of risk deriving from investments and other exposures, like interest rates, inflation and mortality. The solutions exist, but companies and trustees are still failing to take them as efficiently as they might due to the time, effort, expertise and management structures required to consider a whole range of complicated issues.

“By analysing the risks, trustees are able to understand fully the risks that sponsoring employers underwrite in relation to their pension schemes. Equally, employers can then understand the full range of solutions available to reduce the impact of the pension scheme on their business.”

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