We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".



Twitter board

Follow us
  • Plane thinking: Should trustees take a leaf out of the aviation industry’s book to help avoid schemes joining the P… https://t.co/JVoRimIocM5 days ago
  • Portfolio Prepared? We are hosting an exclusive, pension fund only afternoon 4th July 2018 with @AonRetirementUK .… https://t.co/utQf7b8DYv5 days ago
  • Our Cover Story: ESG: A Just reward - With research claiming that better behaved companies make superior investmen… https://t.co/7VqbSkuEvz16 days ago
  • Our March/April issue is available to view now! https://t.co/d4iYIbsnjH https://t.co/EFO6RlYgkB16 days ago
  • Picking a winner - The multi-asset success story has led to the birth of an array of funds under the same all-encom… https://t.co/kTmIsg9DQS27 days ago
  • @NewtonIM – Renewables Revolution ''In this Newton white paper, we discuss the ability of renewables to deliver wha… https://t.co/NtUk6OB6v427 days ago
  • RT @portfolio_inst: @NewtonIM - ESG Investing: Buzzwords or Better Investment? ''is responsible investment simply a passing trend or a mean…30 days ago
  • @NewtonIM - ESG Investing: Buzzwords or Better Investment? ''is responsible investment simply a passing trend or a… https://t.co/K299tUsPOy30 days ago
  • Fools Gold - Bitcoin: An investor’s new friend or a threat to financial stability? Lynn Strongin Dodds takes a look… https://t.co/VKenEj6LQ730 days ago
  • @NewtonIM Sustainable Bond Investing Newton’s Scott Freedman and Victoria Barron review some of the developments in… https://t.co/6woi4Dfqjc34 days ago
  • RT @portfolio_inst: @InvescoUKinsti whitepaper: Sustainable factor investing ''The advent of what might be called sustainable factor invest…36 days ago
  • @InvescoUKinsti whitepaper: Sustainable factor investing ''The advent of what might be called sustainable factor in… https://t.co/rPdm94o9yU36 days ago
  • Old Money: Forget millennial's, pension funds looking for growth should be targeting cash-rich retirees.… https://t.co/TfPklO4QPr36 days ago
  • RT @MSCI_Cudworth: MSCI in the News. EM governance: Breaking through. Michael Cheng discusses the influence of corporate #governance in #…36 days ago
  • Our cover story: CDC: A step into the unknown. Is CDC an unnecessary policy change when effort would be better spen… https://t.co/QGHfTkiPP240 days ago
  • Newton – Trend Setting: The Year Ahead in ESG ''We have seen notable client interest for sustainable products over… https://t.co/OoXVLJ1BMp41 days ago
  • Our Latest ESG feature: EM governance: Breaking through. ''Those calling for better governance in emerging markets… https://t.co/qk0vJpfpJL44 days ago
  • The February Issue is available online now! Our Cover Story - CDC: A Step in the wrong direction. Read more here:… https://t.co/8xwHL9Nd2z44 days ago
  • RT @AonRetirementUK: What do we expect to see in the #ESG market over the next 12 months? Read the results of the @portfolio_inst panel of…44 days ago
  • RT @PensionsSion: What are the pros and cons of building a global #equity portfolio? Find out by reading the @portfolio_inst Global Equitie…50 days ago

On the radar

Plane thinking

Plane thinking

Stephanie Hawthorne
Tuesday 3rd April 2018

Should trustees take a leaf out of the aviation industry’s book to help avoid schemes joining the PPF? Stephanie Hawthorne takes a look at the power of learning from your mistakes.

"It is viewing mistakes as learning opportunities that will help us to improve."

Stefan Lundbergh, Cardano

With high street failures such as BHS and Woolworths fresh in the memory and concerns over brexit continuing to linger, protecting members’ pensions is trustees’ overarching concern. The stage then is set for a new approach to help trustees protect their members’ interests and, perhaps, prevent further schemes falling into the Pension Protection Fund. So is it time to apply black box thinking to defined benefit (DB) schemes?

Black box thinking originated in the aviation industry, where data from flight recorders is used to identify and understand the causes of major accidents and near misses. This information is then used to drive constant improvement in the safety of the industry. In 2017, through the consistent application of this approach, there was not a single passenger jet crash among the major airlines anywhere in the world.

A new report from the Pensions Institute, part of Cass Business School, has extended this framework, which was developed by author and broadcaster Matthew Syed, to manage the issues faced by the trustees and regulators of the UK’s 6,000 DB schemes.

Black box thinking suggests that when making decisions, mistakes commonly occur because trustees focus on what they know and fail to focus on areas where they have little expertise or understanding.

Mistakes appear when investment and funding decisions are separated and trustees fail to challenge the sponsor’s recovery plan or dividend policy. Other common mistakes include a short-termist attitude, especially by sponsor-appointed trustees, in respect of investment performance and hedging strategies and the failure to recognise biases in others, such as the career concerns of finance directors who need to show that the company is doing well on their watch, or of advisers who temper their advice to clients to avoid losing the contract.

The report suggests that schemes do not systematically measure mistakes. Even in schemes with clearer goals, the timescale is often so flexible that the problem can be repeatedly kicked down the road.

There is no industry-wide approach for trustees and boards to learn from their mistakes, with many boards not having a culture of seeking out, revealing and understanding mistakes – consistent with a closed loop mindset.

Professor David Blake, director of the Pensions Institute and one of the report’s authors, said: “If we can emulate the open loop ‘black box thinking’ approach that the airline industry uses to such great effect, we might actually be able to address many of the issues facing DB pension schemes in the UK.”

Page: 1 2 3

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!

Friday View

Friday View

How investor action helps cut CO2 emissions