Pension risk transfer: multiple options for DB pension schemes 

All DB pension schemes are different and these variations will affect the route each chooses towards its endgame.

The market has developed an expanding range of risk-transfer solutions for DB schemes seeking to pass on or reduce their pension liabilities while securing their members’ retirement benefits.

The days are long gone when endgame planning comprised two often distant options: get in shape for a pension buyout by an insurer or reach the stage where you are confident your scheme will be self-sufficient and pay its liabilities over time.

There are now multiple options for trustees and sponsors to select from. And these options can be combined or adopted at different stages of an endgame strategy tailored to your needs.

As well as buyout, these alternatives include a partial buy-in of liabilities, longevity swaps and the new superfund consolidators. Consolidation options such as a DB master trust, fiduciary management and the addition of professional trustees to a trustee board can also smooth the path to pension risk transfer.

Variety creates complexity, making it hard for trustees and sponsors to know where to start when presented with multiple options.

Our summary note provides a high-level overview of the various risk-transfer alternatives available to DB schemes with useful information on:

• Which schemes should consider each solution
• What size of scheme is suitable for each option
• The buyout funding level required
• Which providers offer different options

This short paper is designed to help you understand the basics of the various choices available.