Final salary pension scheme sponsors increasingly considering derisking options


A recent survey of leading UK pensions professionals by Premier, the corporate benefits and wealth management firm, has found most Defined Benefit (DB) pension scheme sponsors have considered some form of ‘derisking’, to reduce the risks of financing their DB arrangement, and that last year’s Budget has increased the focus on member options.

The survey of 133 Pensions Managers, Finance Directors, HR professionals and Trustees completed in December last year found 86% of DB sponsors had closed their plans to new entrants. Whilst only 44% were closed to future accrual one-fifth reported they are considering closing to accrual at some point in the future.

It appears that the Budget has already had an effect on the options made available to members. Whilst few respondents (under 10%) had undertaken Pension Increase Exchanges (PIE), Enhanced Transfer Value (ETV), Triviality or Early Retirement exercises, a large number are considering these options:

  • Triviality Exercise                               – 39%
  • Pension Increase Exchanges (PIE)   – 32%
  • Early Retirement Exercise                 – 20%
  • Enhanced Transfer Value (ETV)        – 15%

Premier found there is still plenty of work to be done in highlighting the liability management options available to scheme sponsors and Trustees. Over a fifth (21%) of those surveyed do not know what an ETV, PIE or Triviality exercise actually is. Furthermore, with a large number considering these exercises, Premier suggests there remains a need for complete and easily accessible membership data: an issue facing many scheme administration systems.

On the investment side, few schemes (approx. 10%) had secured liabilities through a buy-in or a buy-out policy and 13% had rejected the idea. However, almost a third (32%) of respondents indicated they were considering these options.

John Herbert, Head of Actuarial Services at Premier, says: “Most DB sponsors are now considering derisking in some form but increasingly it is also appropriate for Trustees to consider these exercises. PIE, ETV and Triviality exercises give members options with regard to their benefits and help to improve security of benefits for the other members. We expect a continued focus on costs and the increased awareness of the new flexibility available for DC members to encourage more sponsors and trustees to consider offering their members these options.”

The first Premier Pensions Survey is available to download at: