IBE Report Offers Guidance for Pension Fund Trustees

An ethical approach will help pension fund trustees make the right decisions, says a report from the UK’s Institute of Business Ethics (IBE).

Entitled
‘Ethical Challenges Facing Pension Fund Trustees: 12 key questions’
, the report outlines the key questions which pension fund trustees need to ask to help guide them in making sound decisions.

Report author Peter Montagnon, an IBE associate director, notes that pension fund trustees come under pressure from a range of different people and interests: the regulator; the sponsoring company; labour unions; investment firms; politicians and lobby groups. The result can be confusion and uncertainty, as many of the decisions they face involve choosing between competing interests.

The report looks at these ethical challenges – ranging from fiduciary duty, investment decisions and conflicts of interest to employing consultants. It offers answers that, by applying an ethical approach, aim to cut through the uncertainty and help trustees make the right decisions.

“The primary purpose of the fund is to deliver on its promise to provide pensions to those who rely on it, even into the distant future,” says Montagnon. “Trustees have an over-arching obligation to scheme members to deliver on the pension promise. The biggest threat to sound decision-making comes from conflicts of interest where the pressure on trustees is greatest.

“Many suggest that pension funds should be promoting corporate responsibility because it is both ethical and in the broader interest of their beneficiaries. While the social benefits that flow from well-behaved corporations will improve their members’ quality of life, and trustees may have strong personal views about how companies should behave, their primary ethical responsibility remains to the beneficiaries.”

The report aims to help pension fund trustees understand the nature of the choices they face, and encourage them to approach decision making in ways that will serve their beneficiaries well. It also offers advice to any organisation wishing to align its pension fund with its ethical values as well as those working with pension fund trustees: actuaries, investment managers, advisers and consultants.

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