PLSA AC 2020: DB master trusts enjoy improved resilience, says TPT

The aggregate funding level of large defined benefit (DB) master trusts has been more resilient to the turbulence of 2020 than that of other UK DB schemes, according to TPT Retirement Solutions.

As part of a presentation at the PLSA Annual Conference 2020, TPT head of risk management, Tom Neale, demonstrated that DB schemes, represented by the PPF 7800 Index, had suffered more damage to their funding levels than the aggregate large DB master trust.

Data tracking funding levels from the beginning of the year showed the master trust had not fallen below 96 per cent, while its DB counterpart had dropped below 94 per cent in July and lagged behind the master trust in all months but April.

Neal argued that “the risk management adopted by master trusts can help to weather these conditions and provide a smoother journey for schemes”, adding that this “helps to reduce the risk of a valuation date coinciding with a drop in funding level, something which many schemes will be dealing with at the moment”.

TPT Retirement Solutions partnerships director, Sean Gilfeather, said: “I don’t need to tell you that there is much political and economic uncertainty in the world right now, turbulence which is likely to continue for the foreseeable future. Along with the ever-increasing levels of governance and running costs, this means there is unprecedented pressure on organisations running DB schemes.

“We are seeing more schemes benefitting from consolidation and we expect to see more and more sponsors and trustees exploring consolidation options as they face an ever-increasing aggressive and regulated environment, and a more pressing need to manage scheme risks and costs.”

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