Report to help firms manage pensions risk

Pensions Advisory Group offers guidance and checklist to companies. By Tim Cooper, editor, email newsletters, CIMA.

CIMA has published a report on managing the corporate risk of pension schemes. ‘The pension liability – managing the corporate risk’ takes a different approach to other pensions guidance by tackling risk from a corporate perspective.

It offers CFOs and FDs an outline of regulation, the potential risks from the pension liability and how to understand and better manage these risks. The checklist aims to assist companies in producing a tailored action plan for effective corporate risk management.

The publication was overseen by the CIMA Pensions Advisory Group, whose members include finance directors from FTSE 100 and FTSE 250 companies, leading academics, and trustees of some of the UK’s major pension funds.

Stepping up to the challenge

Announcing the launch, the group's chairman, Mike Samuel, said: 'Ever since pensions have come onto the balance sheet, they have become real assets and liabilities that have to be managed like any other. In some cases they are larger than conventional risks. The priority in terms of managing those risks is extremely high. We are not sure that every company has really stepped up to this yet. But they will have to.

'You have to be clear what the risks are - longevity, investment, interest rates, inflation etc. We have laid them out here. Then we encourage people to think more deeply about what those risks really are. How do you measure them and understand all the variants?

'There are techniques and tools for doing this. We are encouraging finance people to take this back to their boards and discuss it and come up with solutions. You can’t just opt out of this, unless you are in an overfunded scheme.'

December 2006