Series Title: Is your pension team fit for the DB endgame?
Part 1: They think it's all over...it is now!! Only for closed DB pension schemes it isn’t quite, which has implications for the way your scheme is now managed.
Closed DB schemes are at an inflexion point. Higher yields have brought schemes close to full funding on a buy-out basis. It follows then, that most schemes’ contributions will stop too, and soon. Cash flow will turn sharply negative.
Schemes seeking settlement will however need to pivot towards assets which can be passed to an insurer (i.e. liquid). Buy-out market capacity remains constrained implying a fifteen-to-twenty-year programme of settlement across the industry. The message is that this will take time
Larger schemes still need to pivot from growth assets to income, with tight management of liquidity.
For pension teams the skills, headcount, organisational structure and cost-base now needed are very different from that supporting a balanced ‘LDI hedge and return’ portfolio.
Avida can help support schemes through this transition by advising on appropriate resourcing models, operational circuits and governance structures. Avida can also provide expert project and temporary headcount support.