Pension liability management

Liability management

Employers and trustees are facing an increasingly difficult task to deal with and balance the time, risk and costs posed by their defined benefit pension scheme.  For many sponsors, costs continue to spiral and ongoing affordability is a real concern.

 

Many pension schemes have significant and material funding deficits posing a financial drain on their sponsor, have liabilities that could stretch 50 or more years into the future and pose risks to the sponsor which are not aligned to their day-to-day business activities.

 

Do you face these challenges?  We can help.

 

More and more sponsors are turning their attentions to risk reduction and liability management solutions to help them reduce and mitigate the risks and costs posed by their pension scheme.  Our consultants offer pragmatic, expert and friendly advice, often combining several risk management techniques to achieve a tailored outcome.



Liability and risk reduction techniques

 

There a number of different methods and solutions for reducing and mitigating risks posed by a pension scheme.  Several of these are routine and trustees and employers carry them out on an ongoing basis - examples include investment-liability-cashflow matching or pension annuity purchase to insure against inflationary, interest rate and longevity risk.

 

We will look beyond these and review the feasibility of different options and solutions, seeking to achieve a balance between liabilities, risks and costs. Possible options include:

  • cessation of future accrual

  • managing the investment strategy to best meet agreed objectives and risk budgets

  • trivial commutation projects

  • flexible retirement options projects - 'FRO'

  • member transfer value exercises (both enhanced - 'ETV' - and non-enhanced)

  • pension increase exchange exercises - 'PIE'



liability balancing