Additional Services

PCS Alert - January 2010
Contact
Rob Dales FIA Rob Dales FIA /uploads/contacts/contact_20.jpg 3rd Floor, Bond House The Bourse Boar Lane Leeds LS1 5EN 0113 203 5883 0779 909 4392 0113 203 5862 rob_dales@jltpcs.com Rob joined PCS in 2007 having previously been a Director at KPMG for 10 years. Rob has 20 years experience of advising Trustees and companies on all aspects of pension matters but in the last 10 years has specialised in providing advice to the company. Rob’s particular expertise is in designing and implementing liability management solutions for pension schemes. He was one of the first actuaries to implement an enhanced transfer value exercise back in 2002. Rob has extensive experience in assisting companies with the more complex aspects of pension arrangements including Scheme Funding, dealing with the Pensions Regulator and the pension implications of corporate transactions and insolvencies. Rob has written several articles which have been published in the Financial Times, Pensions World, Yorkshire Business Insider and Professional Pensions. Rob is also co-author of "An Introduction to Pensions" published by Gee. After graduating with a first class honours degree in mathematics in 1987, Rob qualified as a Fellow of the Institute of Actuaries in 1992.

Risk Solutions

When the risks of DB schemes are considered it has led in many instances to significant pension changes and either:

• A closing of the defined benefit plan for all future employees but existing participants can continue (usually on a reduced level);
• A closing of the defined benefit plan to future accrual;
• A closing of the defined benefit plan for the future with a new defined contribution proposition instead.

Strategies can include:

• Purchasing annuities (either selectively or in bulk);
• Offering incentives to take transfer values;
• Assessing the viability of  buying out some pension increases;
• Maximising Tax Free Cash Sum (TFCS) take up;
• Modifying past rights to replace a fluctuating liability with a fixed one.

The immediate and deferred annuity market seems undercapitalised and uncompetitive. Capital is flowing into the market and new product lines allowing the buyout of all or part of liabilities at commercially viable cost will come to the market. PCS are close to developments and are often involved in origination, allowing us to introduce products as they become available. Another example is credit insurance (with or without security), which is a less conservative approach that can be justified both in cash requirement and investment. Other forms of security may include bank guarantees, letters of credit, contingent asset security or the use of captives.

Creative use of other vehicles without the use of cash can often allow a higher risk investment strategy i.e. more investment in equities. The benefits are obvious; the opportunity for greater returns for the scheme and the resultant reduced funding burden on the employer.