Industry challenges force DB schemes to switch advisers
More than 60% of the largest UK pension funds have already changed or are in the process of switching their actuarial consultant, according to Barnett Waddingham research.
The consultancy's Navigating Change report, seen exclusively by PP, reveals the views of 100 defined benefit (DB) trustees in the second quarter of 2018 from some of the larger pension schemes as they face increasing challenges.
Another 9% said they were likely to consider switching actuarial consultant in the near future.
Barnett Waddingham partner and head of trustee consulting Paul Houghton said: "The UK pension industry is experiencing a structural shift as DB schemes reach mature status."
He continued: "As the number of pensioners increases, schemes' cash flow is becoming restricted, often negative, and trustees need to start planning for their schemes' end. This change is influencing the way trustees manage their schemes and has led many to seek a new type of actuarial consultant."
The report states that looking for a new actuarial consultant is an ‘irregular occurrence', as Houghton explains: "Schemes have been slow to change their actuarial consultant - it is often the longest established professional relationship - unless there has been a breakdown in the relationship or they consider the level of fees to be poor value for money."
The report also found 58% of respondents were looking to increase their focus on the transition between liability-driven investment strategy (LDI) and the ultimate end-game stage as a priority, while 26% were considering it.
The re-evaluation of long-standing consultant relationships is down to a heavy focus on major structural change and realignment of strategy, according to Houghton.
"Scheme maturity and a focus on the potential end-game of risk reduction, leading towards buyout, a consolidator or running without risk, is a major driver to revaluating these relationships," he said.
He added: "The days of a one-size-fits-all, product-led approach are no longer applicable as shortened time horizons mean that schemes need to reflect their own unique circumstances."
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