Aggregated buyout could save smaller DB schemes £700,000

Written by Jack Gray
29/11/2018

Smaller defined benefit schemes could save up to £700,000 in costs if they group together when targeting full buyout, according to data from DB master trust Citrus.

It found that schemes with assets under £10m could expect to save around £400,000, while schemes with assets under £50m could save up to £700,000.

Citrus trustee, Michael Penny commented that “joining together in a DB master trust can provide huge cost savings”.

He continued: “A closely managed, streamlined aggregated approach is attractive to insurers.

“Schemes adopting this approach can take advantage of more attractive insurer pricing and savings on administration and wind-up costs.

“Previously lengthy and costly implementation processes can be significantly improved by consolidating the transactions and pre-negotiating contracts.”

The savings can be attributed to a 50 per cent reduction in adviser costs, a 30 per cent fall in wind-up costs and a 3-5 per cent reduction in insurance premiums.

Penny explained that employers are having to deal with ever increasing complexities when running a DB scheme: “As they face ongoing cost and time pressures many are now looking at consolidation in an attempt to ease these and other burdens.

“Across the range of consolidation vehicles available, different options will be appropriate for different schemes.

“For those employers who are finding it a challenge to meet the demands of running both their business and their DB pension scheme a master trust could now be the best option - enabling them to gain from a range of efficiencies while bringing the goal of full buy-out within reaching distance.”

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