Asking trustees and sponsors one question on whether actuaries are complying with Government regulations can change the amount of your pension and the quality of your future pension provision.

“Have the actuaries provided their Technical Actuarial Standard 300 Version 2 Report yet?”

Ask it because:

• The risk-benefit analysis required by TAS300V2 to compare run-on and risk transfer transactions highlights that most schemes go to “derisk and get rid” strategies are not in members’ or sponsors’ financial interests.
• The reality is that the risk of a reduced pension is minimal, falling and manageable.  The price paid to get rid is that the upside is sold to a third party (which makes large immediate profits) for nothing.  Exercising discretion is what sponsors and trustees should want to do next in all stakeholders’ interests.
• At present, money siphoned out of the UK corporates into schemes is in turn being siphoned on to life insurers.  

Members and sponsors need to know these numbers are being considered.  Transparency changes minds.  Numbers talk: 

Once the numbers are established the governance takes over.  Trustees who do not ask fundamental questions – like assessing whether to hand the assets and liabilities of a Trust over to a third party – risk being in a breach of trust, justiciable by the beneficiaries.  Taking bad advice is probably OK.  Ignoring key subjects is not. 

Trustees and sponsors will be keen to align with new Government policy.  They should then want to ensure members are informed about their new Funding and investment Strategy and how it impacts their Statements of Investment and Funding Principles.

Do not let the sector drift on further with its self-serving Endgames.  Sponsors need to get stuck in to ensure their money and commitment is being used to best effect.  And to have a better pension, what members need to do is ask for one.

Sponsors and trustees should take care to avoid their trusted advisors natural wish to a cover up the track record over recent years.  What schemes need is an informed “heads up” on where they are.  Ask CARO (C-Suite’s Credible Alternatives Reference Organisation) to provide one.  Contact us to find out more.

Trigger sustained high inflows after the Derisking Overshoot by UK DB pension schemes.
 
Cash inflows to bring a UK Capital Market revival can come from existing UK DB schemes becoming investment long-termists.  The bounce back from the derisking overshoot means far more money is available for productive asset purchases than is assumed.  Reversing the long years of cash outflows, weak ratings and sector decline is there for the asking.  Get stuck in.  The case is straightforward.  Risk for members is low and scope for improvement for members and sponsors is very high.  

Leaving the pension advisory sector to its own devices has been a disaster for members and sponsors.  Expect the reassessment to be on the way.
 
Why now?

• Chancellors Hunt and Reeves have changed the political direction post the LDI debacle. FRC and DWP regulations require DB scheme strategy resets. Be keen to hear the outcome.
• De-risk and get rid ASAP” endgame plans are designed to address remote problems at unnecessary costs and by giving up available upside for nothing. Unacceptable.
• Surpluses in schemes can be used to improve pensions and cut / eliminate pension costs for today’s employees. Why not?
• Ask sponsors, trustees and their advisors about their risk-benefit analysis.  Say you will be looking for their publication of an updated Statement of investment Principles.

Your engagement will result in the sector scrambling to self-correct.  No need for you to have a direct investment in the sponsor– it’s about those with the money to invest and who should look to asset manages for new approaches.  Major international groups are prime targets.
 
You and DB schemes:  Show awareness and interest.  Expect Boardrooms to have a DB pension funding refresh in the next year.  Rarely can you achieve so much by doing so little.  An expectation that more money will come into markets will re-energise The City.  Read the attached “DB pension schemes – a productive asset investor perspective”.
 
And to reflect on the economic damage caused by what Lord King and John Kay call the biggest unforced policy error of the century, read the case study, based on its accounts, of Michelin Tyre.  “No Grip. No Stars”. 


Better pensions are also there for the asking.  There's a theme developing here....