In 1988 the Victoria & Albert Museum ran an advertising slogan “An ace caff with quite a nice museum attached”. To update and translate the slogan you could say that some companies are in danger of becoming known as “An awful pension scheme with quite a good business attached”.
Pensions have emerged as one of the big issues facing corporates today. And the impact will not diminish quickly. Any major financial transaction that a company is contemplating now has to be considered from the pension angle as a large part of the strategic planning. This does not mean that pensions will necessary alter or prevent every action, but a wise corporate would discount the pension risk. We have already seen that mergers and acquisitions have fallen because of fears over the unknown and unquantifiable cost of filling in the pension black hole. Treasurers know that other examples abound – debt management and taxation structures are just two aspects. Plus, of course, there is the little matter of running the pension funds themselves – a task made no easier by the introduction of new laws from the government aimed at stiffening the resolve of any board which feels that the pension burden is becoming too much.
The pension problem and the presence of the pension regulator (who is due to write in a forthcoming issue of The Treasurer) means that pensions, however unwelcome, are likely to stay high up the corporate agenda. And that presents both a challenge and an opportunity for the treasury profession. Because at the moment it is not obvious who in the company should be in charge of the company’s overall pension strategy. Perhaps not surprisingly, those involved with the treasury profession are beginning to put forward treasurers as the financial professional best placed to have the vision to see where pensions are touching company plans and the technical skills to understand, explain, communicate and implement the sophisticated solutions which corporates will have to take on board. Certainly the treasurer’s interest in the subject, as witnessed for one in the editorial coverage in this magazine, is rising sharply1. The challenge is that treasurers looking to seriously involve themselves with pensions may have to update and broaden some skills, but that should not be too onerous.
A few years ago treasurers may have looked askance at taking on the role of championing the corporate pension, but that was in the days when pensions seemed to be the sleepy backwater. Any such hangovers don’t apply these days. Treasurers are ideally equipped to lead the corporate pension challenge; they should do it.
1. See Forging the pension trustee p18, A flea-bite p22, The right balance p26 and Technical Update p52.
PETER WILLIAMS
Editor