Ross Fleming’s Post

Our latest analysis shows running a small DB pension scheme is 4 times costlier than a larger one. This cost gap is crucial for trustees and sponsors to weigh when deciding whether to continue the scheme or opt for a buy-out. Schemes below £250m are unlikely to persist solely based on economics. Laura McLaren commented “Running on beyond buy-out funding is likely to be expensive for small schemes. TPR’s 2014 research found that the mean cost of running a small DB scheme was £1,054 per member, compared with £505 for a medium scheme and £281 for a large scheme. Based on these numbers, our modelling suggests that for small schemes annual expenses are 0.55 per cent of scheme assets, compared with 0.13% per cent for large schemes. The practical costs and challenges of managing a scheme for another 20 years tend to be amplified for small schemes.” https://okt.to/QL0n8J #pensions #finances

Our latest analysis shows running a small DB pension scheme is 4 times costlier than a larger one. This cost gap is crucial for trustees and sponsors to weigh when deciding whether to continue the scheme or opt for a buy-out. Schemes below £250m are unlikely to persist solely based on economics. Laura McLaren commented “Running on beyond buy-out funding is likely to be expensive for small schemes. TPR’s 2014 research found that the mean cost of running a small DB scheme was £1,054 per member, compared with £505 for a medium scheme and £281 for a large scheme. Based on these numbers, our modelling suggests that for small schemes annual expenses are 0.55 per cent of scheme assets, compared with 0.13% per cent for large schemes. The practical costs and challenges of managing a scheme for another 20 years tend to be amplified for small schemes.” https://okt.to/PlJvA6 #pensions #finances

Following our recent article on the Defined Benefit (DB) Funding and Investment Strategy Regulations (the DB Funding Regulations) (Finally here: The DB Funding and Investment Strategy Regulations - key points and actions (burges-salmon.com) which noted the missing pieces still awaited in relation to the overall DB funding picture, the Pensions Regulator (TPR) on Tuesday issued its Statement of Strategy (SoS) consultation. Firstly to recap, the DB Funding Regulations require that trustees submit a SoS, alongside their actuarial valuation, as part of planning and managing their defined benefit scheme funding. It “forms part of a package of legislative and regulatory measures designed to improve the security and sustainability of defined benefit (DB) pension schemes.”. The DB Funding Regulations provide that the SoS will be divided into two parts: (1) the headline funding and investment strategy (the FIS); and (2) supplementary matters, including the trustees’ assessment of how successfully the FIS is being implemented and related risks, actuarial information, including a summary of the actuarial valuation and investment information relating to the current investment strategy. Regulation 18 of the DB Funding Regulations requires the SoS to be submitted in a form as set out by TPR. As part of its consultation, TPR is proposing that:- The SoS should be in a standard form and follow a set template (as provided for by Regulation 18), which TPR has provided in order “to make this process easier for trustees and to remove some of the compliance risk”; It will produce separate templates to reflect that schemes will have to provide slightly different information depending on whether they have reached the ‘relevant date’, or whether they are taking a Fast Track or Bespoke approach. It will request less information from smaller schemes in acknowledgement that it is likely the effort and costs of complying is likely to be much larger for such schemes when viewed as a percentage of their overall pension assets or liabilities. TPR is looking to confirm through the consultation whether:- Institute of Directors (IoD) IPEBLA Burges Salmon LLP #bbc @apl #pensions #finance

Running away from running on? In our latest XPS POV, Jordan Harrison looks at the key opportunities and challenges around deciding on a run-on investment strategy and asks why more schemes aren’t considering run-on in the short term ⬇️ https://lnkd.in/egBThd58 #Pensions #PensionSurplus #PensionFunding #PensionSchemes

In between the recent Virgin Media judgment and the new DB funding code, TPR released new guidance for capital release for superfunds. So what? Whilst the clarity on the new superfund regime is very helpful – perhaps more importantly, this now sets a precedent for ongoing capital release within the pensions regime. Whilst currently possible, making it easier to use surplus for the benefit of members and sponsors can help drive growth, increase appetite to run-on, and avoid schemes defaulting to insurance. With continued strong funding levels, and potential (helpful) changes on the horizon, we are seeing a sustained push from schemes considering and implementing robust run-on strategies. https://lnkd.in/epn9kZVj #lcp #pensionschemes #endgame

Clear expectations for the release of capital from defined benefit (DB) superfunds form part of updated guidance released today by The Pensions Regulator (TPR). TPR listened closely to the industry regarding capital release: the position in the updated guidance supports innovation, while retaining protection for scheme members. The DB superfunds guidance now states capital can be released up to twice a year and when meeting a specific trigger and safeguards. https://ow.ly/9Nmr50SKR1O

With the tax year end fast approaching reviewing your Pension / ISA is just one thing you could do to ensure you're making the most of your tax allowances. I am having lots of conversations with clients on how they could maximise returns on personal savings or surplus business cash. There is an interesting article below about how you can benefit from putting profits into pensions. Our Schroders Personal Wealth Team are available to support business owners across a range of personal financial advice. Let me know if you would be interested in learning more. Sam Husbands 07818 013249 David Mattock Jonathan Thomas

Pensions for Business Owners – 3 Pitfalls! Pensions for business owners can be a case of all duck or no dinner!  I’m going to share some key planning opportunities, and threats, in regards pensions for business owners. I’ll go as far as to say that business owners should be aware of these potential threats, and should be actively aware and planning to avoid them. Worth mentioning that many of these also impact PAYE workers. https://lnkd.in/eXM3ANG #business #investment #retirement #financialplanning #businessowners #financialadvisor

The DB funding code in 5 minutes… Having been rumbling on for over 6 years, tPR has now released its final draft of the DB funding code. Fear not, with more than 100 pages to pick through, James Willcock, AIA and I have done the hard work for you! Click the link below to remind yourself how we got to this point, a refresher on what this actually means for pension scheme trustees, and how this could impact scheme investments. #pensions #dbfundingcode #fiduciarymanagement #lgim

The Pensions Regulator has confirmed that the new Defined Benefit (DB) Funding Regulations will be introduced in the new year. For a recap and summary on the contents of this new DB funding regime, please give this article by Eleanor Hart and I a read! https://lnkd.in/e7TRaX8R