- The new team established to provide clients with detailed advice around DB consolidators
- This follows support in principle for DB consolidators from both the DWP and TPR
- The team is made up of a broad range of experts across Mercer with experience in risk transfer, covenant assessment, funding and investments
Mercer, a global consulting leader in advancing health, wealth and career, announces the formation of a new team focused on providing advice around defined benefit (DB) consolidators*. The move follows support in principle by the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) for the DB consolidator concept.
With the focus now on how these arrangements should operate and when are they right for scheme members, rather than whether they should be allowed, Mercer believes there is potentially merit for some schemes to consider investing in consolidators. Headed up by Andrew Ward, the team will draw on wider expertise across risk transfer, covenant assessment, actuarial and investments across Mercer.
“Consolidators offer sponsors the potential to transfer DB liabilities away from the business at a cost that is lower than insured buyout pricing, said Andrew Ward, Partner and Head of Journey Planning at Mercer.
“If TPR’s central test of showing that transferring the scheme to a consolidator will increase the chances of members receiving full benefits can be met, then this could be an attractive option for members. However, while consolidators intend to hold capital significantly above typical scheme funding arrangements, they are less secure than traditional bulk annuities. Covenant considerations will therefore be key for any scheme where there is a transfer of risk from the current sponsor to a consolidator.”
Jo Holden, Partner and UK CIO at Mercer, added “Many of the benefits offered by consolidators such as cost savings and availability of a wider range of assets can be achieved by delegated or master trust solutions. Although the consolidators are as yet untested, the bulk annuity market for solvent schemes was also new just over a decade ago and has now become a key risk management tool. We look forward to continuing our work in this developing area to deliver the best results for our clients.”
Notes to Editors
*Consolidators are organisations that establish shell companies with DB pension schemes to accept bulk transfers of assets and liabilities from other DB schemes, so that the transferring employer no longer has any financial obligations towards the scheme. Instead of an ongoing employer covenant, member’s security comes from a capital buffer provided in part by the price paid by the former sponsor as well as by investors in the consolidator.
Mercer delivers advice and technology-driven solutions that help organisations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 23,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With nearly 65,000 colleagues and annual revenue over $14 billion, through its market-leading companies including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer. In the UK, Mercer Limited is authorised and regulated by the Financial Conduct Authority..