LCP launches new strategic approach for pensions clients

13 April 2023 3 min. read
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Professional services firm LCP has launched a new strategic approach to help defined benefit schemes navigate the challenges and opportunities of soaring pension scheme funding levels. The move comes as the UK’s defined business pensions segment comes under major pressure.

A defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns. However, following a period of economic uncertainty – partially related to the poorly-received budget the government announced in the autumn – the DB landscape is facing massive changes.

With many companies moving away from DB offerings, due to concerns about costs, Parliament’s Work and Pensions Committee is currently researching the future of DB pensions schemes – while other changes in the market mean that remaining DB pension schemes will need to think more carefully about how they approach their endgame.

LCP launches new strategic approach for pensions clients

LCP is a firm of financial, actuarial and business consultants, specialising in the areas of pensions, investment, insurance and business analytics. The firm’s pensions and benefits wing works with businesses to provide actionable and bespoke advice, navigating complex regulations, and giving trustees the right tools to get the best outcome.

As its clients look to navigate the changing environment of the UK’s pensions market, LCP has announced a new strategic approach, to help them. This includes considering four key priorities.

According to LCP, first and foremost, making the most of scheme data is crucial. In a world of increasing competition for insurance, having clean and complete data is paramount, but many schemes are struggling to prioritise scarce administration resources. Meanwhile, schemes also need to carefully manage illiquid assets. As journey plans are accelerated, schemes will need to look to a wide range of solutions to help minimise any loss of value from assets that are being exited potentially sooner than anticipated.

The third point LCP stressed was the need to assess the range of options for technology in the sector. Innovation in the market is welcome, but requires a step-up in training, understanding and advice, to ensure the full range of solutions are considered and unlocked. Finally, LCP will work to help clients optimise member journey and experience. For schemes targeting buy-out and wind-up, insurance is just one step on the journey. Schemes will need to ensure that specialist expertise and resource is in place to support a smooth and efficient journey for members right the way through to any eventual wind-up.

Speaking on the changes, Michelle Wright, Partner and LCP’s Head of Pensions Strategy, commented, “We are entering a pivotal time in many pension schemes’ journeys and our industry as a whole. Improving funding levels will tempt some schemes to race for the exit, but the best outcomes will be available to those who take the time to warm up properly. It will be important for Trustees and Sponsors to properly consider the range of options to determine the right approach for their scheme’s specific circumstances and their members, and then to prepare thoroughly to ensure this can be realised successfully.”