Trustees looking for a future DB buyout need to prioritise data quality and administration with insurers now in a stronger financial position and looking to cherry pick the schemes that are most attractive to them.
Hymans Roberston has warned that trustees that data will be a key factor and they urgently need to address this challenging issue, potentially at the expense of other routine tasks and day-to-day business.
It warns insurers will set some stringent conditions around the basis and timescales on which they will provide quotations. As a result Hymans says that administration is now top of the agenda for many DB trustee boards that are looking to secure their members’ benefits with an insurer.
Hymans Roberston client manager, third party administration Colin Wheeler says: “Administration has never felt as important as it does now, particularly the need for quality data.
“Many trustees and sponsors want to take advantage of the opportunity to fully or partly insure their benefits, so it really is a race against time to get data sorted. Although many schemes now have a real focus on getting their data ‘buyout ready’, a challenge is simultaneously dealing with GMP equalisation and pension dashboards, while the DB market is already facing skills gaps and shortages in its resourcing. But the demands have been made, and administrators need to meet them.
“Some difficult discussions are needed between trustees and their administrator. Failing to do so may compromise a scheme’s chances of getting to market and positioning themselves as attractive to insurers. Where insurers are only prepared to quote in a fixed window or with specific conditions there is little room for negotiation.
“All insurers, for example, will require a legally signed-off benefit specification and this will need someone with intimate knowledge of the scheme to review it against administration practices. Also, many of the data issues needing attention are legacy problems stretching back to the 80s and 90s, matters like franking and equalisation windows. Many of the people working on the data were not even born then, and many with this knowledge have now retired or left the industry.”
He adds: “With a finite amount of resources, trustees must be willing to compromise on some of the day-to-day work, or scheme events, to allow priority to be given to data work. Clearly, there are tasks with statutory deadlines, or member events such as retirements and deaths which must be dealt with, but there are many more activities that could be delayed or postponed allowing the data work to progress. With many of these schemes facing pressure from sponsors to “de-risk”, trustees need to be willing to accept this reality and rise to the challenge.”
