Blog Archives

How Strong is the Case for Defined Benefit Buyouts in 2022?

23/3/2022

Is Risk Transfer a Gamble?

Derisk and buyout is the settled journey plan proposal of the consultancy community. Time for a time out? A new approach may be needed given changing regulations, economics and saver attitudes. Better options are available to benefit all stakeholders.

Solvency II

Hotly debated reforms could change risk transfer pricing materially and change the quality of security the insurance industry offers. Wait?

Life expectancy

2023 CMI tables will incorporate 10 years of stalled improvements; Covid and the 2021 census. Wait?

Sponsor severance value add

Is giving up the sponsor / PPF insurance package for that of the insurer / FSCS worth it? The cap on PPF payments was found to be illegal and more members retiring the PPF cuts diminish. Calculate the difference in cash for members.

Discretionary benefit improvements:

Are benefit improvements with inflation increasing available as was once a regular practice? Not if trustees have ceded control to a life insurer.

Control of savers' investments

Court ruling confirms on-sale of annuities is O.K. Long term who runs the money and what do they invest in? What about ESG and UK economy considerations?

Run on and improve

With employee wages and loyalty renewed concerns for sponsors , recycling surplus cash could help savers and sponsors if the scheme runs on.

At present demand outruns supply provided by a small group of insurers and reinsurers. High margins continue to be achieved by life insurers. A market rebalancing with trustees having more options and time would be healthy

How the Context of DB Pensions is Changing in 2022

14/3/2022

Government wants to reform Solvency II but the Prudential Regulatory Authority and the insurance industry have very different views on what should be done. More research and consultations will take some time.

Since 2011 industry expectation for life expectancy improvements have been excessive. Actuaries think the impact of Covid is best ignored for now. They will produce updates sometime in 2023 when 2021 census data is also available.

As schemes mature and with the PPF’s cap on pension payments declared illegal, the proportion of a scheme’s savers’ pensions covered by the very well funded PPF is growing steadily as time "drifts" by.

The Court ruling re the annuity sale by Prudential to Rothesay showed savers have no continuing control over who provides their pension or the investment policies pursued after a buyout. Benefits of current ESG initiatives can be lost.

Renewal of a pension scheme – running it on with added sponsor backed security generating funds for all stakeholders is a practical possibility. It is supported by major fiduciary and asset managers, banks and insurers.

We have developed a proposition FiduciaryPlus in close partnership with leading financial institutions. It can make running on happen.