The cost and risk of a pension scheme is usually borne by the sponsoring employer. However, other than actuarial valuations and investment strategy reviews, many employers leave the responsibilities for managing cost and risk to the trustees. With legal and regulatory restrictions placed on trustees, employers can often get a more favourable outcome by being proactively involved and making their own proposals to make the necessary changes.
We provide a wide range of services to support pension scheme sponsors. These include:
- Negotiating with the trustees on the actuarial valuation. Generally, we concentrate on the method and assumptions used as they have the biggest effect on the contribution rate and are cost effective to review.
- Advising on the investment strategy, including the setting of triggers so that the asset allocation changes to a lower risk tolerance as the funding position improves. These are sometimes called “investment flightpaths”.
- Reducing the overall cost and risk of the benefits paid by the scheme such as:
- Reducing the future accrual of benefits if the scheme has not already closed.
- Looking at member options such as “Enhanced Transfer Values” and “Pension Increase Exchanges”. We have run a number of these highly successful “liability management exercises”, which have adopted industry best practice member engagement, well constructed offers and which have resulted in considerably higher than industry average member take up rates.
- Advising on the use of contingent assets and other forms of security, including “Asset Backed Contributions”.
Which options are best pursued will depend upon both the circumstances of the scheme and employer, so we try to understand your business as well as the scheme. Often it will be a combination of approaches to gradually reduce the overall cost and risk. In addition, it can be helpful to have a long term plan with milestones set and against which you can monitor progress.