Scheme trustees told to be tougher

Pension trustees were told yesterday to carry out tougher investigations into the financial health of employers. The demand was made by the pensions regulator at a time when large numbers of companies are finding themselves under stress, which puts pension schemes at risk.

In future, trustees will have to take into account how strong businesses are before taking decisions on how to invest pension scheme assets. If a company is weak, the trustees will have to stick to low-risk investments such as bonds. Rules on company pension schemes have been tightened in recent years, not least after several high-profile collapses which had a bad effect on staff annuities.

Jonathon Land, a pensions-credit advisory partner at PricewaterhouseCoopers, said: "The regulator's guidance calls on trustees to assess the covenant with the same frequency and rigour that they assess investment performance.

"This is good news. Given the bearing trustees' funding demands can have on corporate decisions, it is in everyone's interests."