DB consolidation – an alternative endgame?

Published by Jack Sharman, Tom Hargreaves on

Our experts

  • Jack Sharman

    Jack Sharman

    Associate and Senior Consulting Actuary

  • Tom Hargreaves

    Tom Hargreaves

    Principal and Senior Consultant - Corporate Actuary

  • The Pensions Regulator is consulting on a new regulatory regime, which will require trustees of defined benefit (DB) pension schemes to think carefully about their “long-term objectives”.

    It is often assumed that this will involve either:

    • targeting a “buy-in” or “buyout” transaction with an insurance company
    • achieving full funding on a “low dependency” basis.

    However, entry into one of the new “capital-backed consolidator” vehicles might provide an alternative route.

    Our research suggests that consolidation will be the right option for some, but not all schemes. We provide some background to the new consolidation options and consider how trustees can assess whether this may be the right option for them.

    In this note, we explore:

    • the background to consolidation
    • how it works
    • the current providers and what they offer
    • the risks
    • the schemes likely to pursue consolidation
    • and what’s next

    It’s imperative that trustees and sponsors weigh up the options on how to achieve their long-term objective (potentially including consolidation), taking legal, actuarial and covenant advice as necessary. 

    Download our briefing note

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