Role of Trustee in Pension Fund, Financial Management

Role of Trustee in Pension Fund:

Trustees are people in control of long-term asset allocation of a pension scheme. Whatever benchmark they set will, as we shall see, influence the outcome more than anything else. What pressures are trustees under? The assets in their charge would ideally be sufficient to meet the pension promise without depending on the sponsoring employer for anything more than the current level of contributions. The beneficiaries of the scheme will hope that the maximum return will be made on the assets to have a prospect of improvements in benefits. Trustees usually compromise, and determine that their task is to ‘maximize returns within an acceptable level of risk'. The trouble with this statement is that it is meaningless. Trustees have two risks: one, that their stewardship will place an unbearable burden on the employing sponsor of the scheme; the second, that they will be compared to their peer pension funds, and be subject to scorn and contumely from both their members and the employer if they under perform.

Under the Pensions Act, the trustees should consult the employer while determining their investment strategy. There is otherwise a risk that the trustees will adopt a very high-risk strategy, relying on the strength of the employer to make good any shortfall should anything go wrong. The employer may not be willing, or in any position to underwrite that possibility. One other consequence of the Pensions Act is that the trustees are now clearly distanced from the employer. Unless the members vote otherwise, the trustees must have at least one-third of their number elected by the members. The cosy days when the Maxwell family and its hired hands determined what happened to the Mirror Group Pension Fund are a thing of the past.

 

Posted Date: 9/11/2012 1:38:15 AM | Location : United States







Related Discussions:- Role of Trustee in Pension Fund, Assignment Help, Ask Question on Role of Trustee in Pension Fund, Get Answer, Expert's Help, Role of Trustee in Pension Fund Discussions

Write discussion on Role of Trustee in Pension Fund
Your posts are moderated
Related Questions
Illustration Consider a Rs.1,000 par value bond whose current market price is Rs.850. The bond carries a coupon rate of 8% and has a maturity period of 9 years. Wha

Beta Beta is a measure of the market risk, or methodical risk, of a particular privacy or portfolio. Systematic risk defines any risk that influences the value of a huge numbe

Determine the Limitations of trade receivable day's ratio Year-end trade receivables may not be representative of the year. Credit sales are VAT exclusive in the Incom

Are there any legal factors which could restrict a corporation in its effort to pay cash dividends to common stockholders?  Explain. A firm might be legally restricted as to the

What are the negative consequences of a company holding too much cash? A company holding so much cash would be giving up the opportunity to invest much more in income producing a

Is the difference between the market value of the shares (capitalization) and their book value a good measure for the value creation in a company since its foundation? Value cr

Dividend Payout Ratio The percentage of earnings or profit paid to shareholders in dividends. Computed as:   The payout ratio gives an idea about how well earning

PIAC was apparently negatively affected by the safety and health concerns of the EU. With 27 countries raising public concern, PIAC's corporate image is likely to have been spoilt

What is the basic goal of a business? The primary financial goal of the business organizations is to maximize the wealth of the firm's owners.  In turn Wealth refers to value.

MONOPOLY Several governments consider it necessary to prevent or control monopolies. A untainted monopoly exists when one organisation controls the production or supply of a go