The last 10 years have been a very difficult time for defined benefit pension arrangements. Volatile markets, seemingly endless rounds of legislative change, and ever-increasing longevity have driven up funding deficits and increased ongoing running costs. Too often this combination has exerted an unwelcome influence on the sponsor’s businesses, with a real bearing on the value investors place on a company.
Today, the vast majority of plan sponsors with defined benefit arrangements and their trustees are looking for the best way to move to a low-risk position, which minimises the impact of the plan on their business and increases the certainty of delivery of the promised benefits. Some will have the depth of resources to investigate all the options thoroughly, but most have to work with limited resources and budget. There is a wide range of solutions that both the sponsor and trustees could investigate, and it is vital that both parties work together to ensure an outcome that is in the best long-term interests of the members and sponsor, developing a shared vision of the future and the journey that has to be taken to get there.
With the majority of Schemes having Funding Proposals in place, it is critical that both Trustees and plan sponsors work together to assess, manage and mitigate future risks in order to avoid the experiences of the past.
What is Towers Watson’s Pension Risk Solutions service?
Simply put, Towers Watson’s Pension Risk Solutions service is designed to identify and quantify the financial risks faced by your defined benefit pension arrangements. However, unlike similar competitor services we do not stop there: we will set out the actions that we believe you should consider in the short to medium term to manage and reduce the key risks we have identified. And we do all of this taking into account the specific aspirations you have for your pension plan, your financial situation and your members’ security over the long term.
What do you get?
- Discuss the aspirations the company has for its pension plan over the longer term.
- Identify and quantify the key risks the plan is facing.
- Analyse risks inherent under your current pensions strategy.
- Examine both the member options and investment options available to help mitigate or reduce the risks.
- Identify those options that are likely to have the greatest short- to medium-term impact and the optimal order for implementation.
- Provide an illustration of the improvement our recommendations could have on the outcome of your current strategy.