The amount of time senior corporate decision makers are spending on pensions has increased over the past five years, as stronger funding positions and evolving regulations alter the decisions and options facing C-suite executives, according to Independent Governance Group (IGG).

Its report, The Pensions Balancing Act, highlighted the growing time and resource dedicated to pensions in the boardroom, with corporate decision makers facing greater complexity around surplus and changing regulation.

The study of UK CEOs, CFOs, and senior pension decision makers found that 81 per cent had seen an increase in the amount of C-suite and board-level time spent on pensions over the past five years.

More than a third (37 per cent) of respondents said time dedicated to pensions had increased significantly.

While IGG said improved funding levels may be expected to reduce the amount of time spent on defined benefit (DB) pensions, this had only been the case for one in 20 CFOs.

Amid strong funding conditions, many firms were now considering a wider range of strategic questions around surplus release and the long-term value their DB schemes can create, rather than focusing primarily on managing deficits and reducing risk.

Two fifths (40 per cent) of corporate decision makers saw their pension scheme as a source of future value if it remained fully funded, compared to 22 per cent who primarily viewed it as a risk to be removed.

Meanwhile, 43 per cent described their scheme primarily as a valuable way of rewarding current and future employees.

However, IGG noted that this greater range of options brought more complexity, which was creating an additional burden.

Nearly two thirds (62 per cent) of corporate decision makers said their pension responsibilities created pressure or concern within their role.

A quarter (25 per cent) cited future or regulatory change as a concern, while around 20 per cent stated they did not have sufficient advisory or governance support, 15 per cent do not have the time or capacity to get into the detail, and one in six do not fully understand the organisation’s options.

The analysis also highlighted an emerging confidence gap among sponsors, with 29 per cent feeling less equipped to assess how DB scheme surpluses can be used.

The same proportion (29 per cent) cited understanding regulatory expectations and changes as an area of uncertainty.

Just 4 per cent said there were no areas of pension scheme management they felt unequipped to assess.

“For many years, pensions were something boards hoped would require less attention over time,” commented IGG trustee director and head of strategic pension solutions, David Farmer.

“The opposite is now happening. Better funding has expanded the number of strategic options available to sponsors, but it has also created more difficult decisions.

“For years, the challenge for many CFOs was relatively easy to define, even if it was difficult to solve: fund the deficit, manage risk and work towards a long-term objective.

“Improved funding has changed that equation, and buyout as soon as possible is no longer the default option. Sponsors and trustees now have a wider range of credible options available to them, but that makes decision-making more complex rather than less.

“Success increasingly depends on strong governance, effective sponsor-trustee collaboration and access to the right expertise.”

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