Significant increases in longevity, turbulent investment conditions, ever-changing regulation and the rising costs of administration are all adding to the pressures involved.
Many pensions are now bigger than the sponsoring employer. Trustees have to worry about the strength of the employer covenant. How long will the company be there to support the scheme? Will there be pressure to change the benefits basis? Will members get what they are entitled to when the time comes?
All of these issues are driving trustees and employers to take a serious look at reducing the risks involved in running their defined benefit pension scheme. Many have chosen to close their scheme to new members, but this does little to address the risks faced in the existing scheme.
Some are seeking the most complete solution through a full buyout where the scheme is transferred to a specialist insurer. This approach has a number of advantages and will be the best solution for many schemes.
But there are other potential solutions to consider. These include offering enhanced transfer values, changing the investment strategy to better match the scheme's liabilities, and buying in insurance to achieve a perfect balance of assets and liabilities across sections of the scheme.
The vital first step is to be clear about what you are trying to achieve. Working closely with your adviser and a specialist buyout insurer will help you to find the ideal solution for your scheme.
How can trustees be sure members will still be guaranteed their pensions?
If you would like to discuss how Lucida can help you to achieve the best results for your scheme, please contact us.