Most employers with an open defined benefit (DB) scheme have re-examined their existing arrangement in recent years. While the relative costs of operating such a scheme have reduced, driven by changes to the economic environment and life expectancies, headwinds still persist, most notably in the form of further purported change in the regulatory landscape and an increased focus on EDI (particularly the E, Equality). At the same time, the UK pensions landscape has evolved, introducing new, more modern opportunities for providing pensions and broader employee financial wellbeing.
The move from private sector DB pensions to a defined contribution (DC) basis is well documented and while the pace of change has slowed of late, we anticipate that the appetite to make sustaining change will remain. Indeed, while the age-old arguments of financial risk, cost and equity linger, with many schemes finding themselves well down the road to an insurance buy-out, DB scheme closure (alongside the breaking of any “service-linked” benefit, such as remaining salary linkage) has become a necessary loose end that needs tying up before all risks can be expunged.
The challenge facing employers who have not yet moved from DB is what type of pension arrangement to provide and how that fits in with their broader financial wellbeing thinking. Their chosen arrangement must be sustainable, cost-effective and avoid exposing the sponsor to unacceptable financial risks. At the same time, it should be valued by employees, offer flexibility as circumstances change, be sufficiently transportable to accommodate the needs of a modern-day workforce and provide an adequate income in retirement. The evolution of the UK pensions landscape has provided a helpful platform for employers to introduce positive change - most notably the now well utilised flexibilities available through DC arrangements and the, more recent, relaxations of pensions taxations and development of collective defined contribution (CDC) vehicles.
At WTW we recognise there is no one-size-fits-all solution, and we have vast experience of developing tailored solutions for employers irrespective of the size of their UK workforce. We recognise that every client is different, whether that be by your history, the unique features of your organisation or the current and future challenges you will face.
We can work with you at all stages of the process, from the due diligence and design phases right through to communication and implementation.
