Your questions answered

The Pensions Administration Standards Association (PASA) Accreditation programme is an independent assessment of compliance with their standards, which cover a broad range of administration activities. You can check if your administrator has been accredited at the PASA website.

When choosing a pensions administrator, consider whether they regularly seek feedback from members, whether they use technology to enhance members’ experiences, whether they proactively look after members’ data, and what accreditations they have been awarded.

Key areas to consider include:

• Solvency metrics: How does the insurer’s capital buffer compare to industry benchmarks?
• Risk exposure: What are the key risks in their investment and reinsurance strategies?
• Ownership model: Does their structure support long-term financial resilience?

Extra contributions paid by pension scheme members to secure benefits in excess of the standard scheme benefits.

The asset class comprising a range of physical goods. Examples include foodstuffs such as wheat, metals such as copper as well as energy sources such as oil. Commodity prices can be volatile, often as a result of geopolitical and weather events. Commodity prices can rise in response to inflation and can also cause inflation to rise. They can be used potentially to mitigate a pension scheme’s inflation risk.

The amounts paid into a pension scheme by the sponsor and, often, the members as well. Contributions may take the form of regular payments which are part of the sponsor’s normal payroll expenses or may be “special contributions” which a sponsor makes, typically to eliminate a defined benefit (DB) funding deficit (ie the amount by which a scheme’s assets fall short of the target value of assets to meet the scheme’s accrued liabilities).

These are factors which could have a significant impact on the value of an investment and should be considered by investors when making decisions. Legislation means that UK pension scheme trustees must take such factors into account. The term is often used when referring to environmental, social and governance (ESG) considerations although it is not limited to these issues.

ISDA agreements provide the legal structure allowing an investment manager to transact over-the-counter derivatives (such as an interest rate swap or an inflation swap) with third parties (eg an investment bank) on behalf of their segregated pension scheme clients. These derivative instruments are often used as part of a Liability Driven Investment (LDI) strategy.

For the purpose of UK pension scheme legislation, these are deemed to be the views of pension scheme members or beneficiaries including (but not limited to) their ethical views, their views in relation to social and environmental impact, and the present and future quality of life of the members and beneficiaries. Pension scheme trustees may choose, but are not required, to have a policy on taking into account non-financial factors when making investment decisions.

First produced in 2001 by Paul (now Lord) Myners, there are two sets of
investment principles, one for defined benefit (DB) and one for defined contribution (DC) pension schemes. The original principles have since been modified. They are now known as the (2008) Myners Investment Principles for DB schemes and the Investment Governance Group Principles for DC schemes, each comprising six principles. They are designed to improve the overall level of UK institutional pension scheme governance, in particular with respect to investment decision making.

Key risks of run-on include:

• Covenant: Conditions may change meaning the scheme sponsor becomes unable to support the scheme.
• Longevity: Pension scheme members may live longer than expected leading to an increase in pension payments.
• Investment: Asset returns may be lower than anticipated.
• Regulatory: New policy and legal decisions could impact how schemes need to be run.

The administrator of an investment fund is responsible for carrying out day to day administration. This includes activities such as calculating the fund’s Net Asset Value and preparing its accounts and maintaining its financial records.