Defined Benefit  

What you need to know about DB superfunds

  • Identify the role of consolidators in the market.
  • List the features of the regulatory framework.
  • Describe how much appetite there is for the new schemes and why.

The business models have yet to be proven and they are backed by private equity and venture capitalist investors who, by their nature, will expect to see returns in the medium term.

Consolidation is an irresistible force

One thing for certain is that the consolidation market will grow rapidly.

Many believe that the consolidation of DB funds into a smaller number of much larger funds is inevitable. At a recent event we hosted in the City, on a show of hands the majority of attendees agreed with this view.

The debate concerning consolidation is a live issue and there is political will, regulatory support and commercial momentum to make it happen.

Trustees, sponsors and advisers now have to be thinking how consolidation might help their DB scheme meet the responsibility to deliver members’ pensions now, and in the future.

A growing appetite for change

Our economic and political environments are undergoing considerable change and whatever the outcome, there are likely to be far reaching consequences for businesses that continue to manage their DB pensions.

Increasing regulation, governance and funding requirements will only compound the strain.

We have seen increasing numbers of sponsors, trustees and their advisers exploring consolidation options, as they struggle to meet the challenges set by the current environment.

We anticipate this will grow over the coming months and years, as trustees and sponsors grapple with the demands of an increasingly active regulator and a more pressing need to manage scheme risks and costs.

The DB consolidation story is relatively new, but all the signs indicate a market that is about to flourish.

This will offer opportunities to those who no longer wish to struggle with the burden of running a DB scheme and who believe there must be a better, more cost-effective way for them to secure their members’ benefits.

Mike Ramsey is chief executive of TPT Retirement Solutions


Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. There are still nearly how many DB schemes in the UK with estimated liabilities of £1.6tn?

  2. The Pension Protection Fund said in its annual report that recovery plans remain what, at 7.8 years?

  3. "A lot of schemes are struggling to retain trustees and have succession planning problems." True or false?

  4. According to the author, DB consolidators are what for sponsors that are struggling to manage their scheme on their own?

  5. Employers have sought to retain control of their DB scheme because they want their workers to have what in retirement?

  6. The author says what is certain is that the cosolidation market will do what?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify the role of consolidators in the market.
  • List the features of the regulatory framework.
  • Describe how much appetite there is for the new schemes and why.

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