Schemes can make significant cost savings by paying greater attention to efficient data management in advance of any wind-up or buyout because they can avoid liability risk loading from insurance companies, says the consultancy.
The claim comes as Mercer is re-launching its scheme discontinuance service, to meet growing demand for specialist administration expertise to help trustees with wind-up and buyout plans for their defined benefit schemes. The service will support trustees in meeting the Pensions Regulator’s two-year timeline for completing wind-ups and in complying with its Record-keeping Guidelines.
Its new modular-based service assists trustees to either fully outsource their discontinuance service or partner with an expert for specialist aspects. Specialist services may range from project management, benefit reviews and member communications to individual data cleansing, liability discharge and reconciliation and accounting exercises.
Neil Bolding, head of scheme discontinuance services at Mercer says: “When schemes trigger a wind-up, most trustees are limited in moving the full administration to a specialist due to the Regulator’s two-year time limit. Our new approach will help trustees manage the process by retaining their current administrator for day-to-day aspects while having the flexibility to seek outside expertise for specialist tasks.
“This new flexible service will ensure that wind ups can be completed both compliantly and on time – well ahead of the previous industry average which was in excess of five years.
“Many schemes now have their eye on an exit strategy for their defined benefit schemes, and trustees are coming under increasing pressure to deliver against this, including the data management aspects of any wind-up. Modular-based discontinuance services can help trustees plan ahead and work towards the end-game in a more phased approach.
“Trustees often focus on the value of the assets when considering discontinuance, but equal importance should be given to the value of the liabilities – are these fully recorded, and indeed correct? By maintaining insufficient or inaccurate data, schemes will often secure unnecessary benefits for members and their dependents. This can add significantly to the cost of any end game strategy. Trustees have a duty to ensure their scheme data is up-to-date and accurate. But aside from this, it makes clear commercial sense to do so.”