Using our Framework-based Approach to get Back on Track

10 second summary

• Despite being close to fully funded on a buyout basis, a £120m Scheme suffered significant declines in its funding position in 2008, whilst its Sponsor covenant also deteriorated.
• Upon our appointment in 2010, we implemented a systematic, framework-based approach, which kept the Trustee’s focussed on the things that really matter and created alignment between all parties.
• We also put in place an innovative governance structure to enhance efficiency.
• As a result, the Scheme was able to complete a full buy-in in Q1 2020.

What was the problem?

• Despite being close to fully funded on a buyout basis, a £120m Scheme suffered significant declines in its funding position in 2008.
• Its Sponsor covenant also deteriorated during the financial crisis, leading to tensions between the Sponsoring employer and Trustee Board.

What was our solution?

• Upon our appointment in 2010, we worked with the Trustee Board and Sponsor to articulate and agree the Scheme’s key strategic objectives and constraints, which were recorded in a succinct document referred to as the Pension Risk Management Framework (PRMF).
• The PRMF provided a robust framework for all parties to monitor the Scheme’s progress against the agreed parameters, staying focussed on the big picture. It also served as the basis for designing a dynamic risk management strategy to keep the scheme on-track to achieve its objectives.
• Noting the governance constraints of a small scheme, this strategy was implemented via an innovative structure with an asset manager that enabled the Trustees to respond quickly to changes in market conditions should the Scheme fall off-track.
• The robust framework, along with an effective governance structure, helped to build a stronger relationship between the Trustees and the Sponsor, enhanced the Scheme’s governance model and improved the efficiency of the investment strategy.

What was the outcome?

• The Scheme’s funding level increased from around 80% to over 100% (on a self-sufficiency basis), whilst risk was reduced by almost 85%.
• The Scheme completed a full buy-in in Q1 2020.
• All of this was achieved with relatively low levels of Sponsor contributions.

What does this mean for you?

• Our systematic, framework-based approach to investment strategy keeps you focussed on the things that really matter and creates alignment between all parties.