In recent years, changes in regulations and accounting
standards have meant that running a defined benefit arrangement has
become significantly more onerous.
funding regulations tip the balance in favour of the trustees when
it comes to the level of contributions the employer should pay.
Stricter accounting standards require pension costs to be reported
in a realistic way consistent from year to year, with very little
scope for smoothing. Solvent companies have not been able to exit a
pension scheme without funding the scheme to the full buyout level.
Further improvements in longevity, continuing market volatility and
an increased emphasis on governance and regular disclosures are
likely to make defined benefits provision more expensive than
the risks associated with a final salary scheme may be one of the
biggest challenges that a FD has to face. Whilst it is true that
the "nuclear" solution of full buyout may not be suitable for
everybody, it is also true that the range of opportunities
available is sufficiently vast (and in many cases, inexpensive) to
suit most circumstances - not investigating further may be very
hard to justify.
increase in the level of sophistication within the de-risking
market has meant that consulting in the de-risking and buyout areas
is now a highly skilled job. Even in the context of a
straightforward bulk buyout exercise, increased competitiveness
means that specific skills are required to review prices available
from the whole market, ensuring that there is an auditable,
compliant process in place to see the exercise through.
developed extensive consulting experience in the fields of both
de-risking and buying out liabilities. We have designed a programme
that identifies five key steps and considerations we believe are
crucial to a successful and efficient de-risking