Pension schemes are being run with far greater risk than is necessary, and there is an opportunity to create a more stable pensions environment for sponsors and trustees.
Based on extensive modelling, we believe that the purist concept of 'self-sufficiency' is very hard to achieve within the environment of UK pensions legislation and the only way that a sponsor can be sure of not needing to pay more contributions is to over-fund the scheme substantially.
For schemes that plan to run for many years, the use of other vehicles is likely to be necessary to reach stability. Some form of alternative financing arrangement may be an attractive option. For most schemes, bulk annuities still represent the best way to extinguish liabilities. But while they wait for buyout, schemes should still use a range of tools to reduce risk considerably.
A key factor in whether a strategy works is its implementation. Many schemes would benefit from making changes to their operational structure to ensure that they effectively implement de-risking ideas and create financial stability.
This combination of operational and funding change brings Pensions Stability - and leads to increased confidence in DB schemes.
Read our whitepaper on Pensions Stability, or our shorter guide or infographic to understand why Pensions Stability should be the objective for pension schemes, and how to achieve it.
Our 'Governance Challenge' comprises 20 questions, designed to help DB schemes evaluate their own governance. Here, we summarise the results from all the completed challenges to date. The aggregated responses provide an insight into current governance practices, priorities and concerns.
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