Risk transfer services for trustees

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Securing defined benefits with an insurer can make good sense

For trustees and sponsoring employers of Defined Benefit schemes, the growing burden of regulatory compliance adds additional layers of risk and cost to running a pension scheme.

Many see buy-ins and buy-outs as an attractive solution. With both buy-ins and buy-outs, trustees and sponsors are able to transfer risk from the scheme to a specialist insurer.

Where trustees choose a buy-in, they retain the liability for providing member benefits. With a buy-out, on the other hand, they pass that responsibility across to the insurer, lifting away the combined burdens of risk and scheme governance.

How can First Actuarial help?

First Actuarial offers a tailored service to identify the right risk transfer solution for your scheme. Our specialist risk transfer team advises clients on both buy-outs and buy-ins, and we work with all the insurers in the market.

We use our extensive experience to help you find a solution that will meet all your needs.

We can estimate the cost of securing your liabilities and track that for you over time. And through our Client Hub, you can monitor your scheme’s funding level on a daily basis. This makes it easier to spot attractive and suitable risk transfer opportunities as soon as they arise.

We never forget how worrying a buy-out can be for scheme members, as pension provision moves to an unfamiliar insurer. We can take their anxieties away by providing clear and comprehensive information at every stage.

For many schemes full buy-out is not the answer. We use our knowledge of insurers and their costs to identify the approach that will deliver the best value for money.

Where the immediate cost of a buy-out turns out to be prohibitive, we will draw on our knowledge of insurer costs and work with you to create a structured plan.

We recommend this step-by-step approach:

Step 1: Agree a suitable timescale

A risk management exercise is often a long-term project requiring responsible proactive management.

If you can’t afford to buy out straight away, a managed delay can get you to full buy-out cost-effectively, allowing good investment returns and additional employer contributions to build up over time.

We’ll take the time to understand your scheme. We’ll talk with you about your budget, your investment risk and your membership profile. And then we’ll set a timescale that works for you.

Step 2: Set the right investment policy

Setting the right investment strategy goes hand in hand with agreeing a suitable timescale. It’s all about gauging how much your sponsor is willing to pay to control the risks involved in your scheme.

We will help you set the right strategy for you and your sponsor, and monitor it to make sure it remains appropriate for you.

With the Triggers tile of our Client Hub, you can reduce your investment risks if you find yourself ahead of schedule. This will make it much more likely that you will hit your buy-out target date.

Step 3: Sort out your data

Almost all schemes hold incorrect member data.

Over time, many schemes will have been administered by a series of providers, all with different practices. Legal views have changed too – yesterday’s approaches may not be acceptable today. And administration errors can easily build up.

Your data must be accurate if you plan to undertake a risk transfer exercise, and any Guaranteed Minimum Pensions (GMPs) need to be equalised.

If insurers aren’t confident that the data is in good order, they can charge a significantly higher premium.

Step 4: Set up liability reduction exercises

Liability management exercises can reduce your bulk annuity costs. Making an offer to members prior to buy-out can make sense to all parties. It may be financially advantageous to members in certain circumstances, and will also keep your costs down.

To manage any reputational risk and to treat members fairly, it’s important to explain such offers clearly and discuss the issues openly. That way, members will only accept the options you offer if they are right for them.

Why choose First Actuarial?

We offer in-depth experience and structured processes to simplify the complexities of risk transfer exercises such as buy-ins and buy-outs.

We specialise in transactions below £100m which, without the right approach, can be hard to run at a competitive price. A key element of our approach is our strong relationships with all the major insurance providers. They trust us to deliver on our commitments. This allows us to recommend the best insurers for you. Insurers are limited in the amount of new business they can take on, and their first choice will be to work with consultants they trust.

Excellent administration is the cornerstone of a risk transfer exercise. We work hand in hand with our administration team to make your data demonstrably accurate. This gives the insurer the confidence to offer their best price, knowing problems won’t arise later on.

A risk transfer exercise is a complicated process involving complex decisions. Here at First Actuarial we take the time to support you through the process, helping you make informed decisions at every stage.

We’ll work with you in an ethical manner, offering the right options to your staff and explaining their options clearly. This will keep costs and reputational risk to a minimum.

We offer great value for money. We work on a fixed-fee basis whenever possible, and with our pragmatic approach we will offer you the most efficient path through to your risk transfer.

Get in touch

Get in touch with one of our specialists to discuss how we can help you.

I'd like to find out more about buy-ins and buy-outs

We feel reassured that First Actuarial has provided us with advice that is credible, in a way which a lay person can readily understand. This has helped us make informed and far-reaching decisions in a complex area.

Risk transfer services for trustees