Open defined benefit schemes consulting

The new Funding Code recognises that open schemes are different and play a vital role in providing new accrual of benefits. The Code provides specific guidance for open schemes, including flexibility to support sustainable, affordable long-term strategies.

It’s now up to open schemes to use this flexibility to deliver better outcomes for members, employers and society. If they use it well, we’re optimistic that open schemes will stop closing; we may even see some schemes reopening to accrual.

The new Code applies to valuations on or after 22 September 2024 and will likely be with us for at least a decade. That gives open schemes confidence to review their approach to funding and investment and put long-term, sustainable strategies in place rather than being at the mercy of short-term market movements.

Forging a path towards a sustainable, secure, and relevant open DB pension scheme isn’t easy. But good open DB schemes can thrive, which leads to wide-ranging benefits:

• trustees take a long-term view towards investment and manage long-term security and sustainability for many generations
• employers have a wonderful point of difference to attract and retain talent, with intergenerational fairness
• employees build-up high-quality benefits with much more certainty around retirement income

There are challenges. Many private sector DB schemes are entering their endgame. They have different priorities to open schemes and need to target enough money to secure accrued benefits with insurers. And, because regulation necessarily focuses on the many, rather than the few, de-risking dominates the discourse.

Open schemes have an advantage over closed schemes: a long time horizon. The new Code provides specific guidance for open schemes, which can support a strategy that evolves gradually, allowing you to smooth out financial surprises.

With experience of advising over 50 open DB pension schemes in the public and private sectors, we can help you make the most of this opportunity. We’d love to help you enhance the sustainability and security of your scheme. We can help your scheme achieve stable contributions, sustainable investments and an experience that puts members first.

Since 2005, the main cause of scheme closures has been volatility in funding level and contributions caused by a wide adoption of mark to market valuation. This provides an objective assessment of assets and liabilities, but leaves schemes at the mercy of short-term market volatility (and we’ve seen a lot of that since 2005!).

When you have decades, you can take a longer-term view. Your strategy can evolve gradually. While actuarial valuations guide strategic evolution, they needn’t (and shouldn’t) lead to sudden changes in contributions. Our modelling and decision-making frameworks give clear line of sight to changes in contributions, with plenty of opportunity to take early action.

Trustees of open pension schemes are stewards to a growing asset base of £165bn. As longer-term investors, they can make a real difference when it comes to achieving net zero and creating a positive impact for society and the environment.

We’ll help you align your investments with your environmental, social and governance beliefs and the long-term horizon. You’ll also benefit from our wide experience in the private and public sectors to develop a tailored investment strategy that supports your beliefs and evolves as circumstances change.

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An open DB scheme shows you value your employees, but it’s important employees understand and value their benefits. That means understanding your members and prioritising their experience.  

PRISM is our employer and member portal. Tailored for each client, it gives members a personal experience, with unlimited access to retirement income modelling, real-time retirement quotes and transfer value illustrations. We also make auto-enrolment easy.

We know that sometimes members want to speak to an experienced administrator; our dedicated UK-based team adds a human touch.