Schroders has committed to running on its defined benefit (DB) pension and using up to 10 per cent of its DB pension surplus yearly to support DC commitments, ensuring DB stability through guardrails.
This move follows UK pension reforms, which allowed surplus funds to be invested in the broader economy. The guardrails include regular checks and a way to recover contributions if the DB funding level drops.
Aon and A&O Shearman advised on actuarial, covenant, and legal matters.
Schroders chief financial officer Meagen Burnett says: “We are delighted to join the growing list of FTSE 100 companies that are running-on and using their DB surpluses to help deliver continued pension security to our people and growth to the UK economy.
“Schroders has worked closely with the wider trustee group to deliver a structure that works for all stakeholders. The current funding position is testament to our strong investment capabilities across the wider group in delivering appropriate risk-adjusted returns for pension schemes.”
BESTrustees pension trustee executive Lisa Mundy says: “Utilising a defined benefit surplus when the defined contribution section is within the same trust can give rise to many options for improving member and sponsor outcomes. Given the funding level and additional safeguards we put in place we were comfortable agreeing a prudent level of surplus sharing given Schroders’ commitments to its pensions. The negotiations were wrapped into our 2023 valuation discussions which, combined with separate legal advice, enabled us to have the best understanding of our current actuarial position.”
Aon partner Jonathan Wicks says: “We are happy to have supported Schroders and the SRBS trustees in their journey towards active run-on. For schemes in their position and where trustees and sponsors work closely together, we believe that a very high level of benefit security can be provided for members and significant value generated for sponsors via careful risk management strategies. This can provide favourable upside compared to buy-out with an insurer in the right circumstance.”
Schroders Solutions head of fixed income solutions Anthony Earnshaw says: “SRBS has managed to deliver solid incremental returns with a low-risk CDI solution that has put it in a great position to share the benefits across the wider member base. The allocation to Schroders’ CDI building blocks and wider investment solution is testament to both our investment capabilities and our focus on working in partnership with clients to address their investment challenges.”
