Chris Rice: Evolving regulatory environment and financial conditions have caused insurers to look at ways of reducing their exposure to these contracts
Broadstone has launched a specialist service, Broadstone CARE, designed to support the trustees and sponsors of defined benefit (DB) schemes that remain in legacy insured contracts.
The consultant said many DB schemes hold historic group pension contracts with insurance companies but said that, over the years, an evolving regulatory and commercial landscape had caused insurers to reduce the services they offer, outsource to external providers and, in extreme cases, withdraw from the market altogether.
It said the contracts were designed in a different time and generally have unusual benefits, guarantees, investment structures and charges.
As a result, Broadstone said trustees and sponsors have been left with complicated schemes, that "often feel neglected, suffer potentially high costs and are difficult to exit due to the complexity of the guarantees".
Broadstone's CARE service follows a four‑stage framework – collate, analyse, recommend and execute (CARE) – providing trustees and sponsors with clarity, structure and certainty around costs.
The firm said it is a full-service proposition that explains the contract and analyses solutions before offering clear advice and effective execution.
Broadstone said the objective of the offering is to ensure value is maximised from the contract, whether by retaining it or exiting to an alternative arrangement. In either scenario, it said the trustees and sponsor will be fully supported to achieve their objectives.
Head of trustee services Chris Rice said: "Legacy insured contracts were a great idea when they were initially set up, providing a ‘one-stop shop' for all services and including valuable investment guarantees.
"However, the evolving regulatory environment and financial conditions have caused insurers to look at ways of reducing their exposure to these contracts, encouraging exit, outsourcing, removal of services or even withdrawing from the market entirely.
"It is important that these schemes receive the necessary specialist advice to maximise value from either running or exiting the contract and receiving services from a dedicated and attentive team of experts. Broadstone CARE seeks to achieve this and offers a comprehensive process to ensure trustees and sponsors can evaluate their options and maximise value."
