Endgame, Middlegame or Long Game?
I’m interested in the way defined benefit schemes are moving towards self-sufficiency, partly because we need to secure defined benefits for people who have earned a pension from their company and partly because we need to move on and treat those who are in DC workplace pensions – a better deal.
The capacity of employers to meet pension costs out of corporate profits remains high. We are seeing few corporate failures resulting in schemes entering the PPF. But the willingness of the management and owners to meet deficits and pay the expenses of their DB schemes for ever , shouldn’t be taken for granted. Defined Benefit pensions have become a massive item on employer profit and loss accounts quite apart form their impact on balance sheets.
Moving to a point where a defined benefit pension scheme can be bought out , is now a key target for most businesses in the private sector , one that is increasingly attainable as economic and financial factors at last play in favor of scheme funding.
I’m looking forward to next March and the publication of Government figures on scheme deficits, which I hope will make for pleasant reading.
The option to buy out has moved closer this week with the announcement that Clara has passed its assessment by the Pensions Regulator and can begin the process of onboarding liabilities so ceding schemes can wind-up. Superfunds are likely to be the immediate endgame and longer term middle-game for most corporately sponsored DB schemes.
Some schemes will not want to wind up but play the long game, they need to understand why various routes to buy-out are not for them. But they too should consider the operational efficiencies of moving to a multi-employer structure. With the massive disparity between DB and DC workplace pension funding, no employer can afford to overpay on DB infrastructure.
The tireless Stephen Glover has arranged a conference to look at the various ways in which employers can detach themselves from the noxious impact of their pension schemes and you can express an interest in joining via this link (the conference is free, but the audience is intended to be those actively involved in moving their scheme(s) to self sufficiency