The Pensions Regulator has made it clear that it believes some Defined Benefit (DB) pension schemes – smaller and medium-sized ones in particular – could benefit from consolidation.
Consolidating these schemes – in effect pooling their resources with those of others – would give them access to economies of scale that allow them to access better governance, scheme-specific funding and investment strategies, and higher quality – and cheaper – administration.
Consolidation, consolidation, consolidation
Even a well-funded scheme can find itself falling considerably short of the necessary means to initiate a full buy-out of its members’ benefits.
There are alternatives which are based on a more affordable route than an insured buy-out. For example, the scheme makes a bulk transfer to the provider (often following a significant top-up contribution from the sponsor), which then operates it as a section of a single pension fund. It runs the schemes for a period of years, during which time the assets are worked hard as part of a far larger pool, before the schemes are presented to an insurer for buy-out.
These new entrants have yet to prove their business model, but there is an established alternative with decades’ long pedigree – TPT Retirement Solutions. The model – proven.
TPT Retirement Solutions’ DB Complete
is a full-service solution for DB pension schemes. It offers schemes a comprehensive service package within a Master Trust covering trusteeship, actuarial, investment and legal services, administration, scheme accounting, covenant assessment and member communications all under one roof. It offers peace of mind with professional governance for schemes that find it increasingly difficult to demonstrate that they are acting in their members’ interests.
With the possibility that the regulator may soon require DB schemes to issue an annual statement that includes value for money, schemes are desperately seeking an alternative and DB Complete
is both a safe haven and a one stop shop.
Reaping the benefits
The benefits for those schemes that are struggling to remain independent are considerable. Running costs can be reduced by 30%* and sometimes beyond – and access to award-winning administration and investment strategies that include liability driven investment (LDI) is provided as a standard – not a nice to have, optional – feature.
We know this is important to sponsors, many of whom have maintained control of their DB scheme because they care about the income and quality of service their workers will receive from their pension provider in retirement. That may not be possible with other consolidation models. Sponsors and trustees will have to be very trusting and be prepared to walk away once the deal has been done. No such ‘divorce’ is necessary with DB Complete
as the link is retained between scheme and sponsor.
What’s more, without the need to commit so much time to overseeing the scheme, a lot of management time can be reclaimed and directed towards what directors do best – running their business.
This can be done safe in the knowledge that their scheme is being handled by an organisation with more than seven decades of putting the member first.
This is DB Done Better!
To find out more about DB Complete
and how it could help you and your business please contact:
Tel: 0345 123 6660
*Based on independent research commissioned by TPT in May 2018.