Over 75% of trustees wouldn’t ever consider commercial consolidator

Over 75 per cent of trustees would not ever consider moving to a commercial consolidators, according to a report by Hymans Robertson.

Its report, DB Consolidation: A year on, noted that commercial consolidation is “quickly gaining momentum”, with both the Pension SuperFund and Clara-Pensions are already reporting prospective pipelines over the next year, representing a combined total around £20bn.

However, it highlighted that there is still work to be done when it comes to the perception of commercial consolidators. Twenty-six per cent of trustees think that moving to a commercial consolidator would reduce member security; and many trustees believe that they are only for large schemes.

Despite this, the report pointed out that in reality consolidators can lead to a greater than 99 per cent chance of members’ benefits being paid in full, and that they are working with schemes as small as £5m.

It stated that consolidation should be seriously considered if buy-out isn’t realistic in the short-term, if the sponsor is willing and able to pay the required cash contribution, and there is uncertainty over long-term covenant support.

Commenting, Hymans Robertson partner and head of corporate DB consulting, Alistair Russell-Smith, said: “In just one year since the DWP’s white paper on DB schemes we have seen a flurry of regulatory and market activity, with momentum continuing to build.

"Despite many forms of consolidation having existed for decades, the industry-wide drive to lower costs, reduce risks and improve member security has triggered a greater awareness and demand amongst trustees and sponsors for the potential benefits consolidation can achieve.

“Naturally, much of the industry debate and market interest over the past 12 months has been focused around commercial consolidators such as the Pension SuperFund and Clara-Pensions.

"With the first commercial consolidation transaction expected within the next few months and healthy prospective pipelines for both it is clear that consolidation has captured the industry’s imagination. While market interest and awareness is rising, there is still some work to do. In fact, our research shows that over a third of trustees still haven’t heard of either of the two vehicles."

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