Smaller pension schemes are losing the de-risking lottery

Smaller pension schemes are losing out

Looking beyond the headlines of record deal volumes and ever increasing deal size, other, less obvious trends are also emerging. The number of deals occurring actually fell substantially in 2014 and 2015, by approximately 10%.

Director, Pensions

KPMG in the UK

Contact

Also on KPMG.com

Smaller pension schemes are losing the de-risking lottery

Looking beyond the headlines of record deal volumes and ever increasing deal size, other, less obvious trends are also emerging. The number of deals occurring actually fell substantially in 2014 and 2015, by approximately 10%.As the number of large deals increased, smaller transactions bore the brunt of this fall. This doesn’t seem fair given they are typically the best funded schemes and are less able to control risk in other ways.

 

As insurers have limited capital and bandwidth to write transactions, it’s easy to understand why more attention is drawn to writing fewer, bigger deals as this is more resource efficient. Large deals are time and resource heavy, however, and only a relatively small number of these need to be seeking quotations to limit the amount of competitive quotes insurers will supply to other transactions. To increase insurer engagement, small transactions need to be managed efficiently to make them as attractive as possible. The governance process of these transactions is still not efficient and this can be particularly off-putting for smaller schemes where implementation fees can represent 30 or more times the level paid by larger schemes (per £1 of liability).

 

To address this situation, pension schemes need to embrace successful practices seen in other industries. For example, joining other schemes to increase choice and save costs, simplifying the benefits and the governance structure and using technology.

 

Join our webinar on Feb 9 to hear about a solution we have developed in conjunction with all the insurers to address these concerns, giving:

• More insurer choice

• Reduced implementation costs

• Simplified governance

Connect with us

 

Request for proposal

 

Submit

KPMG’s new-look website

KPMG’s new-look website