An ESG Flagship Policy

Repurpose Your DB Pension Scheme to Benefit All Stakeholders
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A Proposal to embrace the role as long term sponsor and ensure scheme supports Group’s S172 Statements and ESG Commitments

As the Board considers employee loyalty, wage inflation and its ESG ethos, adopt a C-Suite Pensions Strategy to:

• Run on long term
• Introduce modernised tier for today’s employees
• Recycle surplus cash to benefit current and past employees
• Align investment strategy for scheme funds with sponsor’s publicly stated ESG objectives.  Make impact and place-based investment a growing feature

The impact can be transformational.  Better direction of resources brings great positive impacts at less cost.  Embrace the Collective Wealth Fund.

Steps to implement

• Agree an Integrated Risk Management plan with the trustees with new Trust Deed and Rules introducing a new (Collective) Defined Contribution tier.  It sets out when excess cash can be allocated on a discretionary basis to the pensions of former and current employees.  Deal with inflation’s impact on pension values.
• Agree a FiduciaryPlus contract.  It sets a long term, low risk, fixed income led asset management framework.  It matches the real cash payments against a good quality member database.  It contains a guaranteed sum from a third party financial institution covering the remote risk of the sponsor’s failure.
• Update Statements of Investments and Funding Principles to incorporate sponsor ESG commitments and member preferences.
• Update employment terms.  Pension provision can again be a key feature for HR in staff recruitment and retention.  A competitive advantage in a changed employment environment.
• Reassess the Governance.  The sponsor’s nominees have a key role in a policy reset away from annuitisation as the “endgame”.  They can demonstrate that long termism works for all stakeholders.

Boards can replace the DB pension “get rid” mindset with a forward looking “run on” policy which works for sponsors, pensioners, employees and shareholders.  
An ESG Flagship benefits all stakeholders.