Managing Closed Schemes – What we offer
LCP has developed specialist, leading-edge tools and thinking for advising companies with closed DB pension schemes. The same ideas and techniques can also be invaluable for companies that are considering closing their DB schemes, and the trustees of such schemes.
The key point to recognise is that closed DB schemes are different. You cannot divorce the financing side from the investment strategy. The fact that most schemes, after they close, become more focused on wind up at some point in the future needs to be taken into account, as does the consequential shift in investment strategy towards bonds.
We have therefore developed “Actuarial Risk Analysis”, a tool that helps trustees and management to understand and manage the uncertainty in the contribution and funding levels. It is designed to answer key questions like:
- What residual risk does the closed scheme pose to the employer’s finances?
- What is the probability that current assets and planned future contributions will be sufficient to provide all the promised benefits?
- What will be the likely effect of different investment strategies on solvency?
As soon as a scheme is closed, its membership profile can change rapidly. We have therefore devised a dynamic investment strategy that can automatically develop in response to the changing mix of the scheme’s liabilities.
For further details, read our Briefing Plus and associated case study.
