Of bulk annuities completed in 2020
of longevity swaps completed in 2020
of all uninsured liabilities expected to be settled by 2030
Our Risk Transfer advisory team focus on helping trustees and sponsors of defined benefit pension schemes identify the most effective way to manage, reduce or remove risk as they progress along the path to their end game target.
We have helped DB pension schemes understand, plan and deliver the outcomes that are right for all their stakeholders and understand that there is no ‘one size fits all’ approach to this. Our team is focused on helping you identify the solutions appropriate for you.
Click on each of the following solutions to find out more.
The bulk annuity market has rapidly expanded over the past few years and transaction volumes appear set to remain at high levels over the next few years at least. Throughout recent economic volatility, the market has remained buoyant and insurer pipelines strong.
While insurers continue to invest and expand to meet the increased demand, it is important that companies and trustees approach the market with a clear set of objectives and implementation strategy.
We often find schemes are closer to buyout than they think but, even if it does remain several years away, there are likely to be meaningful preparatory actions that you can take now.
Our team have advised on c.35% of all buy-ins and buy-outs completed, covering transactions of all sizes. This experience will help you prepare for one of the most important steps in the life of your scheme.
It is often perceived that smaller schemes may struggle to attract the attention of insurers, particularly in the crowded marketplace of today. Mercer have developed a unique offering to help clients in this position – the Streamlined Quotation Service.
Over recent years, many pension schemes have steadily reduced investment risk and this trend is continuing. This leaves longevity as the primary residual risk to their funding position. While this risk can be hedged through a buy-in or buy-out, this won’t be right for all schemes. Strategic longevity-only hedging will be the right move for schemes targeting a long-term run-off, for example, or for those where the sponsoring employer wants to retain the potential benefit of strong investment returns.
There are a range of longevity hedging solutions that have been developed for pension schemes, and Mercer is the only adviser with experience of implementing each of these. Our expertise includes developing a unique small scheme offering, and helping clients understand whether it still makes sense to hedge longevity risk in the midst of a global pandemic.
Implemented appropriately, exercises which offer members different options around what to do with their scheme benefits have potential advantages for members, trustees and companies. Mercer have implemented several hundred member options projects across a team of actuaries and communications specialists, who deploy behavioural science techniques to improve member engagement.
In 2019 we also unveiled our unique Artificial Intelligence (AI) tool, which utilises the information from the thousands of member choices made in member options projects each year to determine the likelihood of each member accepting an offer in relation to their benefits.
A government 2018 white paper opened the door to defined benefit pension scheme consolidation. Two commercial consolidators – Clara Pensions and The Pensions Superfund – have emerged as a result and the Pensions Regulator has provided guidance for trustees who are considering transacting with consolidators. In the challenging economic environment we face today, we expect more distressed employers to find this an attractive option.
However, it is important to remember that commercial consolidators (and indeed buy-in and buy-out providers) are just one end of the spectrum of consolidation options. Mercer have a team of consolidation experts covering risk transfer, covenant and investment who will help you work out what the right solution for you is.
There are a number of other options available to trustees and sponsors who are looking to remove risk from their defined benefit pension scheme. Download our free overview for an introduction, and contact your Mercer consultant for more details.
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