Consultancy firm Broadstone has published a new guide for pension schemes setting out the detailed pros and cons of different end-game options when it comes to the long-term settlement of their liabilities.
It said this was in response to the dramatically improved funding landscape in recent years, with schemes now having a number of new options available to them.
This has seen renewed impetus on end-game planning it said. The new guide, Settlement options for pension schemes, covers:
- Insurance: the traditional route for securing pension scheme liabilities. Broadstone points out this is the tried and tested route, but potentially expensive
- Scheme run-on: Broadstone says this can be a lower risk options allowing a scheme to continue, potentially until the last pensioner dies, in a low-dependency state
- Scheme run-on: there is a higher risk version of this, allowing a scheme to continue for a defined period so that an insurance transaction is cheaper and could be used to improve benefits or provide surplus to sponsors
- Commercial consolidators: this involves passing a scheme over to a for-profit consolidator, removing risk in an alternative way from the traditional insurance route;
- Public sector consolidator: passing a scheme over to a public sector consolidator run by the PPF. Not yet in operation but being considered by the Government.
Broadstone head of consulting and actuarial Nigel Jones says: “We firmly believe there is room in the market, and demand from schemes, for a whole range of competing solutions.
“We welcome the developments in the risk settlement space as outlined in our report: innovation and increased capacity from insurers, the introduction of commercial consolidators and the potential launch of the public sector consolidation (PSC) are all encouraging news for sponsors and trustees of DB schemes looking to secure benefits.
“A PSC would be a welcome addition and part of the solutions set for a very large market. In our view it could be structured to leverage the experience and scale of the PPF, benefit the wider economy, result in more competitive pricing and ultimately lead to materially better member outcomes.”
In total Broadstone, advises over 500 clients and holds one of the largest number of scheme actuary appointments in the UK.