Planning your
strategy for the
defined benefit
‘End Game’
Where are you and
where are you going?
Page 2
At BROADSTONE we recognise
that every scheme is different and
has its own unique challenges
depending on individual
circumstances.
How are you going to
get there?
However, one common position for all pension schemes
as they seek to address their future challenges is that the
majority would not start from ‘here’.
To facilitate this we believe consultants need to change
their approach to ensure a level of pro-activity that
has been lacking in the past. In our opinion too many
consultants have been comfortable with maintaining
business as usual rather than ensuring their advice is
forward looking.
UK defined benefit schemes are in decline. The vast
bulk have already moved from being a core part of the
organisation’s employee benefit strategy to a legacy
financial liability. This liability is also complex draining
valuable time for key personnel and can pose significant
financial risk to the current organisation and its
employees.
Broadstone believes that this needs to be recognised
by Trustees, employers and their advisers and the
challenge of the defined benefit ‘end game’ needs to be
proactively grasped by everyone to ensure the fairest
outcome for all parties.
A scheme’s ability to make progress will vary from scheme
to scheme and it’s important that every ‘move’ made is
considered with the end game in mind.
In addition, the separate areas of actuarial, administration
and investment often work in isolation. It’s important to
ensure that all the pieces work together to identify what
can be done in one area to assist another in improving the
overall position.
The Checkmate Approach –
moving you closer to the
End Game
The BROADSTONE ‘Checkmate’ approach is delivered
through our Legacy Management team.
It encourages Trustees to think many moves ahead and
provides a cohesive way of approaching the end game
regardless of where each scheme begins. It provides a
logical sequence of activity that will help position the
scheme to take advantage of market opportunities as they
arise.
It finishes with a full assessment of the current feasibility
to enact an end game solution. Even where this is not
currently possible all stakeholders can be comfortable that
the position has been fully appraised and the pieces are in
place to seize the opportunities in the buy-out market as
they arrive.
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The Checkmate approach – moving you closer to the end
game
Engagement of all parties
Understanding Scheme and aims
• Trustees
• Key objectives
• Employer
• Analysis of risk
• Advisors
• Funding level
• Scheme members
• Availability of extra funding
• Creation of working group
• Aims of de-risking
• Constraints
Importance of Accurate Data
Investment Strategy Review
• Carry out audit of scheme data
• Potential impact of schemes portfolio on pricing of
solution
• Assess potential impact on availability/
pricing of de-risking solution
Legal Considerations
Feasibility Check
• Review of Scheme Rules to check
Trustees powers
• What are the potential solutions
available?
• Understand exact benefits and extent of
Trustee discretion
• Affordability
• GMP equalisation
• Benefit audit
Pensions options for members
• Trivial commutation
• Transfer values
• Early retirement
• Member communication around new
pension flexibilities
• Stop/go?
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Benefits of the Legacy
Management Approach
• Provides a full appraisal of the current position and
what options are likely to be available in the future
• Identifies the key risks and allows earlier mitigation
and management of risks
• Creates a team view which includes inputs from all
key parties
• A simple action plan highlighting what you need to
do now, and things you can choose to do later
• A greater feeling of control over your pensions
responsibilities
• The ability to move nimbly if opportunities present
themselves.
‘We recognise that many schemes will not yet be in a position to proceed.
Many might also decide that the current timing may not be right. However,
by ensuring that all available moves are considered this will enhance the
opportunity and flexibility for the scheme to take advantage of End Game
solutions in the future.’
Contact us
Warren firth
Actuarial Services Director
T: +44 (0)20 7893 2123
E: [email protected]
December 2014
Broadstone Corporate Benefits Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register
number 587699). It is a company registered in England, No. 07978187 and its registered office is at 55 Baker Street, London W1U 7EU.
Broadstone Risk & Healthcare Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register
number 308641). It is a company registered in Scotland, No. SC191020, and its registered office is at The Business Hub, 45 Vicar Street,
Falkirk, Scotland FK1 1LL.
Each of the above companies uses the trading name BROADSTONETM.
Whilst care has been taken in preparing this publication it is for information only. It is not, and should not be construed, as advice
and accordingly no reliance should be placed on the information contained herein. Any views or opinions expressed herein are not
necessarily the views or opinions of Broadstone or any part thereof and no assurances are made as to their accuracy. Please contact
Broadstone to discuss matters in the context of your particular circumstances.
Issued in the UK only. This document is only for your use and must not be circulated to anyone else without consent.
www.broadstone.co.uk
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