The cost of operating a defined benefit (DB) pension scheme has become an increasingly important issue for companies and trustees. Over the past year liabilities have rocketed as real interest rates have fallen to deeply negative levels. Many companies and trustees will receive a wake-up call when updated on the latest funding position of the scheme.

In some instances the liabilities and obligations can threaten the very survival of the sponsoring company. Escalating deficits and crippling contribution levels have made it harder for businesses to attract new investment, blocked M&A deals and impeded normal business restructuring.

Helping you tackle defined benefit pension scheme risks

Without a strategy to reduce or remove the key risks within the scheme, employers will continue to face the possibility of increasing cash commitments to fund what must seem like never ending deficits, whilst for trustees poorer funding places greater weight on the employer covenant to remove this over time.

As more and more corporate sponsors and trustees are looking to remove or reduce the risks inherent in funding their schemes, we provide independent advice on practical and financially viable options to do this, either via investment strategy changes, annuity purchase or liability management.

We have detailed experience of all forms of de-risking and will suggest the optimal route given your specific scheme circumstances, market conditions and current legislation. We have worked on behalf of both trustees and employers on many projects including a large number of annuity transactions; asset liability modelling to quantify and remove individual risks and liability management in all its forms.

We can also provide a scheme actuarial service to trustees as we have many years of scheme actuary experience and appointments for many different sized schemes with varying characteristics.

Our solutions

As well as traditional actuarial services for both trustees and sponsors we have a large degree of experience of implementing pension scheme de-risking solutions including:

  • Liability-driven investments : removing unrewarded risk by investing in leveraged interest rate and inflation funds or products and flight planning to achieve this over time
  • Growth asset diversification : reducing rewarded risks through the optimal diversification of growth asset classes
  • Annuity transactions: removing all pension risks by purchasing annuities at competitive pricing and optimal market timing
  • Scheme Closures: ceasing the further accumulation of risk by removing future accrual and advising throughout the consultation process which underlies this
  • Liability management: removing liabilities at cost-effective levels though transfer values, trivial lump sums and the reshaping of benefit design.
Partner, Head of Pensions Advisory Services Paul Brice

+44 (0)20 7728 3423

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