Members of DB Schemes Should Ask Trustees Whether Risk Transfers in 2022 are in their Best Interests

• Can discretionary benefit improvements be made (even if on a one time basis) with trustee and sponsor support?  Have the trustees asked or put proposals to the sponsor for such increases as inflation reduces the value of pensions?
• Is the best policy for the scheme right now to wait and see before any risk transfers are made?  Inflation, Solvency II and life expectancy uncertainties make decisions now unsafe.
• What is the financial benefit of a transfer of my pension to a life insurer over and above what the sponsor (with the PPF safety net) already provides?  How much does this difference fall each year?
• Who controls the asset portfolio and what they invest in once a buyout or buyin has happened?  Can the insurance policy be sold on by the life insurer to any financially sound group irrespective of its ownership and investment ethos?
• Can anyone know how material Solvency II changes will be to pricing?  New entrants post Solvency II make the life insurance industry far more competitive and add capacity.  How can you know if buyins and buyouts represent value for money given the unknowns?
• Are assets being sold now to meet cash collateral calls for LDI hedges if rates rising?
• Will Covid and the 2021 census radically alter longevity assumptions in the 2023 tables?  How can members benefit as actuarial prudence trues up?
• Are virtually all longevity swaps of the last 10 years out of the money because life expectancy has not improved?  Have buyins simply embedded an overstated mortality table at great cost?
• With the high standards set by ESG and S172 commitments, won’t the sponsor want to stay involved rather than abdicate responsibility?
• What margins do life insurers and pension consultancies expect to make?  Why have they become so profitable?
• Why are members’ views ignored in setting investment policies as seen in most Statements of Investment Principles?
• Should members be consulted for their views ahead of a buyout?  Should a vote be required?
• Where is “the peace of mind” in real pension value decreases?  A scheme that can afford a buyout could have afforded discretionary increases as part of an agreement with the sponsor.

EMPLOYEES OF TODAY AND YESTERDAY:  ASK FOR A NEW DIRECTION, NOT AN ENDGAME FOR PENSIONS:  EXPECT MORE.