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Pension Funds

Majority of U.K. pension funds changing or plan to change actuarial consultants

A majority of U.K. pension funds have changed or are considering changing their actuarial consultants, according to a survey released by actuarial consultant Barnett Waddingham.

The survey of 100 trustees conducted in the second quarter of 2018 found that 40% of pension funds had changed their actuarial consultants recently. Some 21% of respondents said they were considering such a change in the next 12 months, compared with 30% of pension funds that were unlikely to reconsider consultancy services.

The research found that primary motivations driving pension funds toward a change were new focus and objectives. Fund maturity and a focus on the potential end-game of risk reduction leading towards buyout is the likely catalyst, the consultant said.

More than half of pension funds in the survey named de-risking a top strategic priority right now, compared to 26% of pension funds that were considering it currently and 16% that were likely to consider it in the future.

In addition, 57% of surveyed trustees said they expected their annual spending on actuarial consultants to increase over the next 12 months, compared to 40% who said the cost will remain the same. Only 3% of respondents said it will decrease.

Reconsidering consultant contracts is most commonly triggered by reaching a crisis point in a current initiative, 76% of the survey respondents said. Some 70% of pension funds said they would do so because of changes in market conditions, while 66% considered it to be standard governance procedure. Sixty-two percent said it was triggered by rising costs.

The survey also found that 38% of trustees think consultants can fall short on expectations when it comes to independence of thought.

"Independence of thought allows a consultant to be unrestricted in offering what they consider to be the most appropriate advice for an individual scheme," Paul Houghton, partner and head of trustee consulting at Barnett Waddingham, said in a news release Monday. "The scheme — and the consultant — can therefore be confident advice is correct for the scheme (avoiding) reaching such crisis points, which can happen if there are other factors influencing the advice."