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Strategic Planning for Defined Benefit Schemes

The challenges facing pension scheme


We have been advising trustees of defined benefit schemes for many years.
Over this period, we have developed solutions that can help trustees to manage these challenges.

1) Start with a Scheme Review

Trustees will be well aware of the escalating costs associated with defined benefit schemes.

The chart below, prepared for The Pensions Regulator, shows the average cost per member per scheme.


Chart 1.1 - Mean per member annual running cost be scheme size3

Our consultants are well placed to offer a scheme review which will help benchmark your scheme against your peer group. It provides an independent review of the core elements of your scheme:

Scheme Administration

  • To include data management and record keeping
  • Management of member benefits including calculations
  • Members communications
  • Pensions payroll
  • Management of scheme bank accounts,
  • Monitoring of risk and internal controls,
  • Preparation of scheme annual accounts

Independent Trustees

Actuarial Services

  • Triennial valuation

Legal Services

  • Interpretation of scheme documents
  • Legislation
  • Member disputes
  • Legal support in respect of funding negotiations
  • Advice on an employer restructuring or refinancing

Investments & Advisers

  • Investment consultants & advisers
  • Investment managers

This ‘no obligation’ review is undertaken by one of our team. Third parties such as actuaries and investment managers may be used to assist in the process. All data will be treated in the strictest confidence.

2) Create a Strategic Plan to de-risk your Scheme

Working with the information from the scheme review we can help the trustees create a strategic plan to help de risk the scheme.

Why de-risk your scheme?

The cost to employers of operating a DB pension scheme has risen dramatically and for many schemes we are now at the point where the cost of de-risking will almost certainly be less than the long-term cost of doing nothing.

This may therefore be the moment to look seriously at removing or managing the risks in your scheme. The reasons are compelling:

  • Investment markets will always be volatile and this can have a significant impact on funding levels and the resulting contribution requirements
  • Longevity (how long people will live for) has increased considerably and future increases are generally expected.
  • Investors and lenders are likely to favour companies where management are actively tackling ‘the pension problem’
  • De-risking helps to improve the security of members’ benefits
  • De-risking frees management to pursue rewarded risks and boost company enterprise value.

What are the solutions to the problem?

We can help Employers and trustees to put in place a realistic strategy for dealing with their exposure to DB pension scheme risks. This strategy needs to consider:

The short, medium and long-term funding objectives for the scheme

  • The covenant position of the sponsoring employer
  • The current asset and liability profile of the scheme and resulting contribution requirements
  • The potential future development of the scheme’s assets, liabilities, funding position and resulting contribution requirements, crucially, using stochastic as well as deterministic analysis
  • The on-going affordability of the scheme
  • The benefits and associated costs of implementing different de-risking solutions
  • Having an integrated approach to funding, investment and covenant when making strategy decisions for the scheme
  • And finally, a holistic approach to managing scheme risk which takes all of these factors into account

3) Create a Strategic Investment Plan

Many trustees have experienced the frustrations around developing a robust and effective investment plan. We can help trustees develop a long-term strategy that takes into account the following factors:

  • Scheme funding levels and future employer contributions
  • Any scheme deficit and recovery plan
  • Cash flow requirements of the scheme i.e. pension scheme levies, costs (actuarial, audit, professional fees), members taking their benefits
  • Trustees attitude to risk
  • Any specific investment restriction e.g. ethical

Trustees need to work with the employer when deciding the investment strategy, as it will influence the amount and timing of contributions they may need to pay to the scheme.

Taking risk may bring rewards but you should understand the risks being run and manage them appropriately. We can help trustees assess and review their attitude to risk.

Trustees should consider how different strategies may affect the scheme’s funding position, the employer’s plans for sustainable growth and the employer covenant.

We can also help to diversify a scheme’s investments, e.g. concentrating investments in a similar industry to the employer will increase the risk of underperforming if there’s a downturn in that industry.


Trusts are not regulated by the Financial Conduct Authority.

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