Open DB schemes

We recognise that those pension schemes that continue to offer ongoing defined benefit pension accrual in some form are different to those that do not. This is the case whether a scheme is open to new members, open to future accrual or simply has benefits with a retained link to final salary. Our specialist team has extensive experience of helping both trustees and companies manage all types of open schemes.

Due to the increasing cost and risk of providing defined benefits, the number of open schemes has reduced significantly in recent years: in 2010, data collected by the Pension Protection Fund showed that 21% of defined benefit schemes were closed to new benefit accrual; ten years later, this figure has increased to 46%. With this trend expected to continue, there is a possibility that some in the pensions industry will overlook issues affecting open defined benefit schemes.

This is where our specialist open schemes team is able to help. With a dedicated focus on issues that affect open schemes, the team ensures that our advice is tailored and complete. Working in partnership with trustees and companies, we are ideally placed to advise on all aspects of open schemes including:

Future service contributions – The approach taken to fund future benefits is a key part of an actuarial valuation. Our aim is to give this issue the prominence it deserves, so that trustees and sponsors can agree a sustainable approach to meeting the cost of these benefits.
Investment strategy – Open schemes have a number of features that should be considered when designing an effective investment strategy (such as often being cashflow positive or having a longer investment horizon than a typical scheme). Rather than selling ‘off the shelf’ products, we provide independent investment advice that takes account of these important features.
Long term objective – The Pensions Regulator now expects all pension schemes to set, and work towards, a long term objective. While this is a concept which could be seen to fit most naturally with a closed scheme, we work with open schemes to design an objective which both meets the requirements of the Regulator and supports the future development of the scheme.
Automatic enrolment – We help open schemes with all facets of regulatory compliance, including automatic enrolment requirements.
Senior active members – We help senior individuals understand the pensions taxation issues associated with continued accrual.

Benefit design

Often in an open scheme, trustees and sponsors are working together to ensure that the benefit structure remains viable. However, with steadily increasing costs of pension provision, sometimes something has to give. We have experience of guiding all parties through changes to benefits, and plenty of ideas about how to put a more sustainable structure in place whilst still delivering good member outcomes.