The Trustee’s role in Closed Pension Schemes
Many defined benefit schemes are now closed to future accrual and are no longer part of an employer's reward strategy. They are often viewed by the sponsoring company as being a drain on management time and cash resources and having an unwanted impact on the balance sheet.
Finance Directors may dream of being able to discharge this obligation completely by means of a buy out. Although this may not be affordable in the short term, there are a number of steps that can be taken to manage the risks and reduce the liabilities associated with the pension scheme over a longer period. These will require the company and trustees to work together towards a common goal, and can be time consuming and complex. At ITS, we have led trustee boards of all sizes of scheme through many de-risking and liability management exercises.
Having ITS’s direct experience on a trustee board will bring confidence to fellow trustees facing the issues for the first time. We will work constructively with the other trustees to assist the company in meeting its objectives, subject however to being mindful of regulatory requirements and our responsibilities to protect members' interests.
As an alternative to active liability reduction, an employer may aim for the pension scheme to become self sufficient in a certain period of time so that it could cease paying deficit reduction contributions; in addition it may want investment risk to be steadily removed as the funding position improves. As one of the trustees, we at ITS would usually be keen to support such aims. Furthermore, we may arrange for the monitoring of financial conditions and the annuity market, so that the trustees can act quickly should a short term opportunity present itself.
For an informal discussion on how ITS might be able to help your scheme, please contact us.
The attached document outlines the role that trustees have in the overall scheme strategy and the more common risk reduction and liability management measures.
