The Pensions Regulator is putting greater emphasis on DB schemes to be certain of their endgame planning.
In its provisional revamped DB scheme funding code, The Pensions Regulator wants schemes to set a long-term objective, encompassing its funding and investment strategy and with the aim of reaching a "position of low dependency" on their sponsors. For many closed DB schemes, this expected to involve an end game - transfer to an insurer, or another route to removing the scheme from the sponsor's balance sheet and securing member benefits.
We asked more than 100 schemes whether they see member options as being a key part of the journey to reaching their end game. Some 31% confirmed it was a key part of their strategy, with a further 52% indicating they had not yet dismissed this opportunity.
What's in the toolbox?
Many trustees and sponsors find providing member options to be a useful tool to accelerate the time to reach buyout.
Bulk exercises can be used to simplify schemes and liability can be discharged at a much lower cost than securing the benefits with an insurer.
Furthermore, given that the options available to members and support to understand those options may change irrevocably after buyout, trustees see the importance of fully communicating with members about their options ahead of buyout as being part of good governance.
Schemes are increasingly developing formal "member journey plans" to document the plans for their members' experience alongside funding and investment plans ahead of buyout.
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This article was funded by AON