Paula Llewellyn: Our surplus transfer capability reflects the maturity of the DB market and the growing need for joined-up, cross-scheme thinking to help improve retirement adequacy across generations
L&G has launched a solution to provide defined benefit (DB) scheme trustees and employers with the capability to transfer surplus funds into defined contribution (DC) scheme arrangements.
The pension provider and insurer said it was now able to offer the capability, subject to individual scheme rules, through L&G's master trust or L&G administered own-trust arrangements – an offering it said was a "practical solutions" to a maturing market.
L&G said that L&G's DC pension products allow for recognised transfers of surplus funds from DB schemes into DC arrangements – noting that such transfers would help employers reduce their ongoing contribution costs or increase contributions to strengthen employee pension outcomes, while remaining compliant with existing scheme rules and tax legislation.
It said that, in the case of any surplus transaction, existing scheme liabilities to members would not be impacted and transferring trustees must be satisfied that making a transfer would be in accordance with scheme rules and fiduciary duties to act in members' best interests.
The move follows the publication of the Pension Schemes Bill earlier this month – a bill which will provide increased flexibility for DB schemes to safely release surpluses. It also follows the government's response to its Options for DB Schemes consultation, where it pledged to introduce a statutory override and base surplus extraction around low-dependency targets.
L&G said that, while the evolving regulatory framework is set to make the responsible extraction of scheme surplus more widely available as an option to trustees, it was able to offer this capability now, subject to individual scheme rules.
L&G Master Trust chair of trustees Robert Waugh said: "The trustee board were pleased to recently approve the transfer of DB surplus funds into L&G's master trust, recognising its potential to increase the security of ongoing contributions to members' savings in a transparent and well-governed way. This is a timely solution that provides long-term benefits to DC savers, while maintaining the high standards of oversight and compliance that underpin the master trust."
L&G DC & workplace savings chief executive Paula Llewellyn added: "As regulatory and policy developments create new opportunities for pension schemes, we're well positioned to support trustees and sponsors with solutions that unlock value responsibly and help deliver better member outcomes.
"The discussion of how to efficiently utilise DB surplus funds has been steadily growing in recent years as clients seek to prepare their endgame strategies. Our surplus transfer capability reflects the maturity of the DB market and the growing need for joined-up, cross-scheme thinking to help improve retirement adequacy across generations."
