Defined Benefit pension scheme public policy has changed. Endgame thinking has dated.

DWP Regulations require from September 2024 a Funding and Investment Strategy.  Buyout or buy-in plans require actuaries to provide comparisons of bulk transfers and run-on longer options. Technical Actuarial Standard 300 Version 2 can be transformational. Running-on and providing positive use for surpluses arising is supported by Government.  

The ultra high profits of life insurers from taking over pension schemes is now an issue all should note.  Simply handing money over to them without sufficient analysis is likely to come to be seen as a mistake which reflects badly.

Sponsors are required to be involved in setting the new Funding and Investment Strategy and should be positive.

That work will show:

• The probabilistic benefit to members of having a life insurer as opposed to the corporate sponsor (with their respective safety nets of PPF and FSCS) is modest and falling.
• In contrast the upside to sponsor and members of running-on and using surpluses (to improve benefits and reduce or eliminate sponsor pension costs including those for current DC employees) is real and available. 
• The Board needs a briefing paper covering the financial evolution of the scheme (annotated accounts extracts), summary of where it is now ad the investment strategy currently set.

What can happen next: 

With the company providing such back-up as needed to eliminate trustees’ anxieties the pension professionals have exploited so profitably attractive long term plans can be put in place.

The Board can decide whether its DB scheme can provide a great worked example of its ESG ethos in practice – including generating a competitive advantage of offering improved pension provision, alongside the objective of eliminating pension as a continuing cost to the company.

The Board resets the remit of those directly involved by asking for a long term plan and indicates it can provide the back up needed. 

​Expect trustees to provide a new approach and have your own point person ready to work to put it in place.

A TAS300V2 Case Study