Navigating Change: TPT’s Expertise in DB Scheme Consolidation

Amidst the dynamic landscape of pension management, Jonathan Jackaman, the Head of Business Development at TPT, illuminates the countless possibilities now within reach for scheme trustees and sponsors as they navigate their unique pension journeys.

He states, “Each consolidation option has particular advantages. As with other things, it all boils down to determining the best method for your scheme, sponsor, and members. In many circumstances, it may be advantageous to apply various consolidation methods as you proceed throughout your end-game trip.  

For instance, transitioning to a single supplier for all services to address both data and illiquid asset difficulties, then to a master trust, and lastly ensuring members’ benefits by the buyout.”

Since the inception of the Department for Work and Pensions’ (DWP) white paper on ‘protecting defined benefit pension schemes’ in 2018, a wave of innovative solutions has surfaced, empowering trustees and sponsors in the adoption of consolidation strategies

While the public sector grapples with these changes, a substantial majority of UK businesses have seamlessly embraced defined contribution (DC) programmes. Consolidated DC arrangements have become the industry norm, with a noteworthy shift from ‘unbundled’ own-trust DCs to a unified model over the past decade.

The triumph of consolidation in the DC domain is propelling trustees and sponsors toward exploring analogous efficiencies and economies of scale for defined benefit (DB) schemes. Regardless of your position in the pension journey, the spectrum of available options ensures a tailored consolidation strategy that optimises your plan.

Key Advantages of DB Pension Scheme Consolidation

Streamlined Cost Efficiency

Consolidating DB pension schemes unlocks a distinct advantage in cost efficiency. The intricate and resource-intensive nature of managing pension obligations is streamlined through consolidation, realising economies of scale. This process streamlines administrative functions, minimises redundant efforts, and harnesses bulk purchasing benefits, resulting in substantial cost savings.

Centralising activities, including investment management and administration, fosters more effective communication with pension scheme members, thereby enhancing engagement and comprehension of retirement benefits.

Robust Governance Framework

Combining multiple schemes into a unified structure establishes a robust and streamlined governance framework. This centralised approach simplifies decision-making processes, clarifies responsibilities, and streamlines communication channels.

Enhanced governance allows for quicker responses to evolving economic conditions, regulatory requirements, and shifts in the financial landscape. A consolidated DB scheme benefits from a dedicated governance team focused on strategic planning, risk management, and compliance with dynamic pension legislation.

Strategic Risk Management

Consolidating multiple DB pension schemes facilitates greater diversification of investment portfolios, mitigating the impact of market volatility on pension fund assets. Pooling resources enables a more strategic and diversified investment approach, reducing vulnerability to individual investment underperformance and economic uncertainties. This approach spreads the overall risk profile across a broader spectrum, enhancing the scheme’s resilience.

Amplified Funding Accessibility

Consolidation creates larger, more diversified pools of assets, providing pension schemes with enhanced investment capacity and access to a broader array of opportunities. Larger asset pools empower direct investments in diverse asset classes, including private equity, infrastructure, and alternative investments, which may have been challenging for smaller, fragmented schemes to access individually.

This increased access to different investment alternatives has the potential to produce higher risk-adjusted returns, allowing consolidated DB plans to optimise their investment strategies and handle market changes more effectively. As individuals look ahead to the future of pension administration, the benefits of DB pension plan consolidation promise to generate unprecedented efficiency and value.

About TPT

TPT is a prominent supplier of pension services, providing creative alternatives for defined benefit pension plans. TPT is dedicated to assisting trustees and sponsors in navigating the changing pension market, and they offer experience, assistance, and bespoke solutions to meet their specific requirements.

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