Hewitt Associates recently predicted that the number of UK companies with defined benefit (DB) schemes now closed to future accrual could double over the next year alone.

Jackie Daldorph, managing principal at Hewitt Associates, is the person tasked with leading the cross-discipline offering for DB pension schemes that have ceased future accrual, otherwise known as 'frozen plans'. Her job is helping schemes set their financing strategy and then align the execution. Due to the nature of frozen plans, however, her role extends much further than that of a scheme actuary.

The work Daldorph is now involved in is worlds apart from when she first joined the pensions industry in 1981.

Back then, DB was very much 'the norm' and pensions in general were not "viewed in the commercial sense they are now," says Daldorph. "We've seen a massive recognition of the financial significance of private pension funds over the last 30 years."

After qualifying as an actuary in 1988 she had the opportunity to gain a great deal of experience at Aon and JLT before joining Hewitt in 1999. One of her roles at the latter was to help set up the Pensions Management Consulting Practice a number of years ago, offering pensions manager and scheme secretary services to clients.

Today she has six scheme actuary appointments, predominately with clients of up to £500m in assets: a mix of blue and while collar workers and some who contract with the public sector. "I love working with trustees and I'm very lucky (being able) to bring clients all the services they need," she says.

"I have to cover all aspects of pensions and this means you get quite a practical view of life." And this is incredibly useful when working with frozen plans as they involve so many connected disciplines.

Certainly Hewitt's recent findings that the number of DB scheme closures could double in the next 12 months gives a strong indication of just how active the frozen plan arena is going to get over the next few years.

New opportunities
"For companies now embarking on a plan freeze, the issue becomes how to do so while still keeping the members, their unions, and trustee boards onside," explains Daldorph.

This is not straightforward, however, because when a DB scheme closes to future accrual its whole way of operating changes. "When you have an employee population that is accruing, the HR team is very close to it. Once the scheme stops accruing, then the likelihood is it becomes more of a finance driven machine," she explains. The point to remember, says Daldorph, is that the pension fund is now open to "new opportunities", and these are what she helps clients explore.

"I always tell clients not to trust to luck; don't do all the freezing and then say 'that's it, we're done'. Companies and trustees should be sitting down together and asking 'how do we get to the end game?' This is the perfect opportunity for those two parties to come together with the mutual goal of getting the best outcome for members."

Everyone wants to talk strategy, according to Daldorph, but one of the key aspects to get right when it comes to frozen plans is the execution. "Someone said to me the other day that you only get one chance at doing something at that price, so you've got to do it right. You wouldn't want to say we missed the buy-in opportunity because our data wasn't right".

Data, for instance, might not be the most exciting topic for trustees, but Daldorph argues that it is essential for pension schemes to get their data in order quickly because for a frozen plan, "every step you take after that can be compromised by it".

The recent Hewitt Pension Administration Survey 2010 revealed how scheme administrators are under continued pressure to do more for less. Closure to future accrual was cited by 30 per cent of respondents, made up of pension managers and trustees of both DB and defined contribution (DC) schemes, as the main reason for changing outsourcing strategy. This undoubtedly creates new challenges, as does the loss of in house knowledge as the years roll by.

Timing has also become more of an issue over the last three years, since funding has worsened and deficits have become bigger.

"If you are a frozen plan, you should get yourself to a place where you want to be quickly, and everybody's learnt this the hard way over the past few years," she points out.

Trustees need to be clear about where they want to get to with their frozen plan, and this is where Daldorph knows she can help. "I'm in a very lucky place because I just think, what hasn't Hewitt got in its toolkit?

"I think we have got everything, and I keep thinking, gosh, I've landed on
my feet."

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