Certainty Over Benefits And Data The Largest Obstacle To DB Consolidation, Says Equiniti

23 March 2018

Equiniti comments on this week’s long-awaited release of the defined benefit pension scheme white paper.

Equiniti, one of the UK’s largest pension administrators, has said that despite the government’s enthusiasm for a consolidation drive among small and medium sized defined benefit pension schemes, the practical implications will be difficult to overcome.

 Commenting on this week’s long-awaited release of the DB White Paper, Duncan Watson, Head of Workplace Pensions at Equiniti, said:

“The economies of scale achieved in the commercial de-risking market provide significant benefits to the members who have their pensions secured by an insurance contract. It is understandable that the government would want to see this replicated across schemes that would not be able to transact with an established insurer because of the scheme’s size or the cost of buy-out.

“However, in our experience the obstacles to most schemes buying out tend to be practical as much as anything. Finding enough people with the expertise to take on such complex work will be a significant challenge. Moreover, establishing enough confidence in multiple schemes’ data quality and benefit accuracy to pool risk across them will be no mean feat.

“The regulator has taken steps in its latest Scheme Return questionnaire to make all schemes focus on their data quality but that does not necessarily ensure accurate benefits. This means a position where record keeping is of a sufficient standard to allow consolidation across the industry is still some way off for many.” 

Under the White Paper the government will:

  1. Consult this year on proposals for a legislative framework and authorisation regime within which new forms of consolidation vehicles could operate;
  2. Consult this year on a new accreditation regime which could help build confidence and encourage existing forms of consolidation;
  3. Work with the Regulator to raise awareness of the benefits of consolidation with trustees and sponsoring employers through, for example, the Regulator’s Trustees Toolkit and updating guidance; and
  4. Consider some minor changes to guaranteed minimum pensions (GMP) conversion legislation to support benefit simplification, which will help reduce complexities in existing benefit structures. While the government acknowledged that benefit simplification could be advantageous to schemes looking to consolidate, it stopped short of proposing a change in legislation to allow trustees to simplify members’ benefits without their consent.


For more information:

Temple Bar Advisory:

William Barker / Sam Livingstone

Tel: 07827 960151 / 07769 655437

Email: williamb@templebaradvisory.com / saml@templebaradvisory.com

 Notes to Editor:

About Equiniti

Equiniti is a specialist outsourcer delivering technology-enabled solutions to some of the best-known brands and public-sector organisations in the UK, including c.70 of the companies in the FTSE 100.

It is the UK’s leading provider of share registration and associated investor services, and also has market leading positions in administration of employee share plans, pension administration and software, and employee benefit schemes.

Equiniti’s services, which are delivered by over 4,300 employees, benefit 28 million people in the UK and 120 countries around the world.

Equiniti enables charity to happen through the services we offer, giving our clients the opportunity to donate.