Flexibility crucial to DB sustainability

Speaking at the PLSA Investment Conference last week in a session entitled ‘DB: Your Flexible Friend’, Faith Dickson, partner, commented on her work on the restructuring of the Halcrow Pension Scheme and its implications for stressed DB schemes in light of the Green Paper and the 2nd DB taskforce report:

“Restructuring the struggling Halcrow Pension Scheme was a landmark transaction, allowing benefits to be reduced while the employer remained solvent, and securing outcomes for members which are better than PPF compensation.

“The Halcrow structure is under consideration as an option for the future under the Green Paper. But whether it can become a blueprint for other struggling DB schemes, rather than just an interesting case study, will depend on whether the government can be convinced to introduce more flexibility into the system.

“Some schemes are struggling because the employer’s business is no longer viable. But for others, like Halcrow, it is the scheme rather than the business that is pushing the employer towards insolvency.

“The PPF works well to provide compensation for members where businesses have failed. But where there is still a viable business, we shouldn’t shy away from making changes that would enable more schemes to restructure and give members more than PPF compensation, even if the benefits are less than members originally expected to receive. We need to face up to reality and have the right tools to improve member outcomes, rather than just keep hoping for the best.”

Watch Faith’s stream session on the PLSA YouTube channel here.

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