Upheaval in the pensions industry continues, creating new challenges for trustees. In January 2007, Wragge & Co LLP and Paternoster led a round table discussion with independent trustees to discuss the 'new' pensions world.

According to Wragge & Co LLP pensions partner Jason Coates, it is essential that trustees understand the rapidly developing buy-out market. They need to be aware of, and understand, developments relating to defined benefit schemes in order to assess new options put to them and protect themselves.

Mark Wood, Chief Executive of Paternoster, commented: "The drivers behind the new pensions reality are: increases in life expectancy, changing corporate accounting disclosure requirements and changes to the regulation of pension schemes all of which encourage risk reduction. The buy-out market is one way for companies and trustees de-risk their liabilities."

Wood added: "The least understood of the drivers is mortality. While it is true that people are not going to live forever, people are living longer than previously predicted. This increase seems set to continue and life expectancy has not been properly reported up to now. If it was, then the level of scheme deficits in accounts would substantially increase."

The majority of defined benefits scheme have a deficit on at least the buy-out basis. The new scheme funding requirement puts the onus on trustees to come up with a funding strategy to remove scheme deficits. This has led to an expansion in the buy-out market where established players as well as new entrants to the market, like Paternoster, are developing buy-out solutions for schemes regardless of whether or not the scheme is winding-up.

As part of the trustee knowledge and understanding requirements, trustees must have appropriate knowledge and understanding of the principles relating to scheme funding and investment.

Coates said: "The development of new pensions solutions adds to trustees' burdens. Trustees need to keep up to speed with what is going on in the market place if they are to respond to company proposals and take advantage of suitable opportunities. As the knowledge burden for trustees continues to grow, we will continue to see a more significant role for professional trustees helping trustee boards make decisions."

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For further information about this press release, contact Kathryn Hobbs on +44 (0)121 213 2397, Alexa Highfield on +44 (0)121 213 2396 or Amie Ryalls on +44 (0)121 213 2360

This press release may contain information of general interest about current legal issues, but does not give legal advice.