A large majority of UK pension schemes, 83% of defined benefit (DB) schemes and 80% of defined contribution (DC) schemes, would recommend their investment consultancy to another pension fund with similar needs, according to a National Association of Pension Funds (NAPF) survey.

The results are based on 369 interviews of NAPF members during the first quarter of 2009. Six large consultancies accounted for 71% of overall responses. Where respondents used more than one investment consultancy firm, they were asked about their main consultancy arrangement. Understanding a scheme is the highest-rated service provided by consultancies. Eighty-nine percent of defined benefit respondents and 81% of defined contribution participants say their consultancy is either very good or good at understanding their scheme.

The lowest-rated category is value for money. Less than half (46%) of defined benefit schemes rate value for money as very good or good compared to 58% last year. The results reflect the equity market downturn and the difficult environment UK schemes find themselves in with funding ratios near historic lows. Indeed, the coverage ratio of the vast majority of 7,800 private sector defined benefit UK schemes fell to 76% in February and most UK schemes have characteristically high allocations to equity. Forty-four percent of DC schemes rated their consultancy as good value for money compared to 47% last year.

“For DB schemes, overall satisfaction dropped by a small degree in all categories. However, the drop was by more 10% or more in three categories: supporting dialogue with a sponsor, asset allocation and value for money. In the case of DC schemes, four services were more highly rated compared to 2008 and five were less highly rated. Satisfaction with individual consultants and manager selection increased by almost 5% amongst defined contribution schemes while it decreased by more than 5% in two categories, value for money and preparing written communications for members.

DB schemes were also asked to define the services that their investment consultancies provide. The vast majority say that their consultancy provides strategic advice (93%) and manager selection (88%) services. In other findings, 15% of schemes say their investment strategy has had a negative impact on trustees’ funding objectives, 10% believe their investment strategy has had a very positive impact and 47% say it has had a positive impact.

VB