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As a result
of the mismanagement of their pension schemes, many UK companies
are now exposed to serious risk following recent market turbulence,
according to PricewaterhouseCoopers (PwC).
The professional services firm says that falling revenues, rising
costs and borrowing restraints are taking their toll on businesses,
which in turn are becoming more risk averse and are increasingly
seeking ways of reducing potentially costly pension schemes.
However, while business leaders are acknowledging the need for managing
pension risk, few have implemented the proactive, coordinated processes
necessary to manage exposure effectively, according to PwC.
“While risk appetite will vary among organisations, almost
all would benefit from a less reactive and far more systematic approach
to addressing unwanted pensions risk,” commented Richard Cousins,
partner at PwC. “Implementing a robust risk management framework
is critical as companies struggle to re-align risks and allocate
their thinly-spread capital appropriately. A cross-business approach
to risk also brings better control and lends companies greater flexibility
to respond to market opportunities and challenges.”
PwC has also predicted that due to recent market developments and
consequent new future market forecasts, buy-outs will become less
appropriate solutions for pension funds.
Chris Massey, partner at PwC, said: “Unless driven by a definitive
business need, such as a corporate transaction, pension scheme buy-out
is often not the most economically viable option. Aside from the
few companies that have already taken steps to lock in a buy-out
price, the pipeline of large deals is drying up in the face of current
market conditions.”
- Pensions Age
September 2008
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