The 12-page publication stated that self-sufficiency was hard to achieve in Britain in the aftermath of the Budget pension reforms, so tackling the issue of de-risking was paramount to gain stability.
The report highlighted that modest risk accumulates over time, assets are volatile and the only way that a sponsor can be sure of not needing to pay more contributions is to over-fund the scheme substantially.
It said that tackling the issue of de-risking was vital, but pension stability could be achievable only if the operating structure of the scheme is optimal, enabling people to identify and implement the solutions that they need.
For most schemes, bulk annuities would still represent the best way to extinguish liabilities.
The report concluded: “Unlike some of the financial issues, there is no off-the-shelf product that can be bought to deal with this. But it is certainly an area that would benefit from attention, and we would encourage trustees and sponsors alike to review their operational structure and come to their own conclusions about its ability to support the scheme’s objectives.”
Adviser view
Allan Maxwell, director of Glasgow-based Corporate Benefits, said: “Pensions schemes do have serious issues of funding and they are expensive, so to try and stabilise them may improve funding levels.
“The recent Budget changes give trustees and employers a way to reduce liabilities by giving individuals the opportunity to transfer benefits out of fixed-salary arrangements. However, it is crucial that they fully understand the implications.”
