Tom Ground at Legal & General explains how insurance solutions can help finance directors sleep at night.
Over 2014 deficits of private sector schemes increased by over £100bn – more than double the annual UK corporation tax bill and more than the UK spent on education. Pension scheme deficits are a real problem for UK Plc, which must generally be funded through employer contributions in order to fulfill the pension promises made to employees and former employees. In truth, deficits are volatile and will vary with interest rates and inflation expectations. Increases in life expectancy also lead to increases in deficits, as this means that pensions need to be paid for longer.
Insurance solutions, such as buy-ins, buyouts and longevity insurance represent the only way to completely remove pension scheme risk and Legal & General is a leading provider of these solutions. In 2014, we implemented insurance solutions with the ICI Pension Fund covering £3bn of pension scheme liabilities and also the TRW Pension Scheme covering £2.5bn of its liabilities. These arrangements were respectively the biggest buy-in and buyout ever completed in the UK.
The keys to success in these cases were collaboration between stakeholders, which includes the pension scheme trustees, sponsoring employer and Legal & General, and timing. Implementing insurance at the right time can ensure a cost effective removal of risk, enabling deficits to be brought under control. These success factors are the same regardless of the size of the pension scheme involved.
Call 0203 124 2980 for more information.
○ Insurance is the only way to completely remove risk
Raj Mody is the PwC Head of Pensions Consulting and Skyval leader. In this video, Raj discusses how new technology is transforming DB pension scheme management.
Pension practitioners often complain that information can take a long time to prepare – so much so that, when it is ready, it is often out of date and interesting opportunities may have been missed.
Skyval is an industrial-scale platform that offers a range of tools to support both trustees, sponsors as well as allowing all of their third-party advisers to access a single source of data as the basis for their calculations, advice and decision making. Skyval provides the right information at the right time.
PwC has recently launched Skyval Insure, which is radically changing how the buy-out market operates by stripping out wasted time, energy and cash. Other tools are typically based on indirect assessments of pricing, which inevitably suffer from approximations and becoming out-of-date.
Skyval Insure provides the most accurate buy-out pricing tracker available in the pension market. Insurers have direct and confidential access to a detailed model of the scheme’s pension liabilities via the Skyval platform and use this to inform an initial buy-out price. All insurers active in the buyout market have signed up to use Skyval Insure on live deals.
Contact us to find out how Skyval could add value to your scheme. skyval.com