You are currently viewing Navigating Change: TPT’s Expertise in DB Scheme Consolidation

Navigating Change: TPT’s Expertise in DB Scheme Consolidation

Consolidating DB schemes might make it difficult to determine which option is appropriate for your scheme. Jonathan Jackaman, Head of Business Development at TPT, discusses the possibilities that are now accessible to you, no matter where you are on your ultimate journey.

Since the Department for Work and Pensions (DWP) issued its white paper on ‘protecting defined benefit pension schemes’ in 2018, the sector has seen the development of a slew of new goods and services aimed at assisting trustees and sponsors in adopting consolidation strategies.

Outside of the public sector, the great majority of UK businesses now provide defined contribution (DC) programmes to their existing employees. For newer schemes, consolidated DC arrangements are ‘the standard’. Over the last decade, several previously ‘unbundled’ own-trust DCs have also moved to a consolidated model.

The success of consolidation in DC is going to be a major motivator for trustees and sponsors to investigate how they may benefit from comparable efficiencies and economies of scale on the DB side. And, given the variety of alternatives presently available for DB schemes, there is sure to be a consolidation strategy that can benefit your plan, no matter where you are in your path.

Combining some or all aspects of operating your plan can result in considerable time and expense savings while enhancing quality and decreasing (or, in some circumstances, eliminating) the strain on your trustees.

Jonathan Jackaman, TPT’s Head of Business Development, noted, “Each consolidation option has particular advantages. As with other things, it all boils down to determining the best method for your scheme, sponsor, and members. In many circumstances, it may be advantageous to apply various consolidation methods as you proceed throughout your end-game trip.

For instance, transitioning to a single supplier for all services to address both data and illiquid asset difficulties, then to a master trust, and lastly ensuring members’ benefits by the buyout.”

The Best Aspects of DB Pension Scheme Consolidation

Cost Minimisation

Consolidating Defined Benefit (DB) pension schemes offers a distinct advantage in terms of cost efficiency. In a landscape where managing pension obligations can be complex and resource-intensive, combining multiple DB schemes into a consolidated structure allows for economies of scale. This consolidation streamlines administrative processes, reduces duplicate efforts, and leverages the benefits of bulk purchasing. By centralizing activities such as investment management, administration, and regulatory compliance, organizations can achieve significant cost savings.

Additionally, consolidating DB schemes often facilitates more efficient communication with pension scheme members, leading to better engagement and understanding of their retirement benefits.

Improved Regulation

Combining multiple schemes into a unified structure allows for the establishment of a streamlined and robust governance framework. This centralised approach facilitates more effective decision-making processes, as responsibilities become clearer, and communication channels are simplified. Improved governance enables quicker responses to changing economic conditions, regulatory requirements, and shifts in the financial landscape.

A consolidated DB scheme often benefits from a dedicated governance team that can focus on strategic planning, risk management, and ensuring compliance with evolving pension legislation, fostering a proactive and well-informed approach.

Risk Management

By combining multiple DB pension schemes, organisations can achieve greater diversification of their investment portfolios. This diversification helps mitigate the impact of market volatility on pension fund assets. A consolidated approach enables the pooling of resources and assets from various schemes, allowing for a more strategic and diversified investment strategy.

As a result, the overall risk profile of the pension scheme is spread across a broader spectrum, reducing the vulnerability to individual investment underperformance and economic uncertainties.

Accessible Funding

Consolidation allows for the creation of larger, more diversified pools of assets, providing pension schemes with greater investment capacity and access to a broader range of investment opportunities. Larger asset pools often enable direct investments in a more extensive array of asset classes, including private equity, infrastructure, and other alternative investments that may have been challenging for smaller, fragmented schemes to access individually.

This enhanced accessibility to diverse investment options can potentially lead to improved risk-adjusted returns, allowing consolidated DB schemes to optimise their investment strategies and better navigate market fluctuations.

About TPT

TPT is a prominent supplier of pension services, providing creative alternatives for defined benefit pension plans. TPT is dedicated to assisting trustees and sponsors in navigating the changing pension market, and they offer experience, assistance, and bespoke solutions to meet their specific requirements.