The Case for Consolidation
The first report of the DB Taskforce showed that the current system for DB provision is too fragmented, manages risk inefficiently and has rigidity baked into benefit structures. Consolidation – the process of bringing together and simplifying some or all of the elements of DB provision has the potential to tackle each of these.
The second report of the Taskforce, ‘The Case for Consolidation’, examines four models of consolidation, from simple consolidation of administration functions through to pooling of assets, combining governance and finally the pooling of liabilities with the removal of the employer. We set out an approach for the creation, authorisation and supervision of Superfunds. We believe these Superfunds can offer a much better route to protecting members’ benefits.
To understand the impact of a Superfund, we commissioned modelling from Gazelle corporate Finance Limited’s ‘Mousetrap’ Integrated Risk Model to assess the effects on the security of members’ benefits and illustrate the funding requirements for schemes and employers. A full report of Gazelle’s modelling 'Modelling the case for a new public Superfund as a consolidation vehicle to address legacy defined benefit scheme risks' can be found here.