By considering integrated funding and integrated risk management (IRM) both individually and collectively, trustees and employers can determine the most appropriate means of funding a scheme’s liabilities.
In doing so, they may need to consider:
- What are the correlations between possible movements in the scheme’s investments and the ability of the employer to inject cash into the scheme due to changing market conditions?
- What is the likely duration of the employer covenant – and, in turn, its ability to ride through periods of investment volatility?
- To what extent might a diversified but return-seeking investment portfolio be a better means of securing members’ benefits when associated with a weak covenant with a restricted ability to inject cash into the scheme?
Through the use of technology, scenario analysis and facilitated discussions, and working collaboratively with other advisers, our team can help trustees and employers consider a wide range of different scheme funding options. These will take into account correlation effects, creative funding and contingent asset structures, and advice from your other specialist advisers.
We can advise on the formulation of an IRM framework that highlights the material risks each element of the integrated funding approach is exposed to, and clearly sets out measures trustees and their advisers can take to address off-plan performance.
We believe that IRM plans should be:
- Focused on risks that could materially change the strength of the scheme’s funding position
- Practical and actionable
- Presented in ways that can be clearly understood
Our team has considerable experience of advising on integrated funding and IRM plans for a wide range of schemes with employers in different sectors. We have different approaches and different levels of complexity for each situation, and innovative technology that can bring together the different aspects of integrated funding and IRM and how they fit together.
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