What is Dalriada.Together? 

Streamlining Pensions Management with Dalriada.Together

Dalriada.Together is a highly efficient consolidated approach to pension scheme management. 

The traditional approach to running a pension scheme was for a Trustee Board to be constituted and put in charge of delivering the objectives of the pension scheme. The Trustee Board would typically be six to eight members, sometimes more. Their duties include: 

• Administering the benefits and paying the beneficiaries in accordance with the Scheme Rules.

• Keeping records of their meetings and the decisions they make.

• Keeping financial records and obtaining audited accounts.

• Collecting contributions from the sponsor and investing the assets of the Scheme.

Despite the responsibility being with the Trustees, in practice most of the duties above are undertaken by a third party on the Trustees behalf.

Pension Scheme Management: Challenges and Solutions

The administration of member benefits, paying beneficiaries and the collection of contributions have typically been delegated to third party administrators. Help must then be sought when deciding how the assets of the Scheme are to be invested. 

The record keeping and governance of meetings, actions and decisions is often carried out on behalf of the trustee board by a scheme secretary or pensions manager (inhouse or outsourced).  

Maintaining financial records and keeping audited accounts has also fallen to third parties.  

It is a trustee’s duty to seek professional advice on matters of technical complexity or uncertainty. Further, there is a legal duty to obtain advice in some such areas. Advice can only be considered from advisers who have been formally appointed. Therefore, trustees have an arsenal of professional support. Actuaries calculate whether the Scheme has enough money to pay the beneficiaries and how much the sponsor needs to pay in future. Investment advisers help the Trustees decide where to invest the money. Lawyers make sure the Trustees act in accordance with the Rules and with wider legislation. More recently, covenant advisers help the Trustee determine how long they can rely on the sponsor’s support for. 

The traditional approach has worked well for a very long time. Trustees have done their job and there are currently many millions of pensioners receiving their monthly pension without a hitch. 

For large schemes with material budgets to spend on operations, delivery and advice, the traditional approach continues to work well.   

However, the traditional approach has been criticised as being cumbersome, slow to deliver objectives and costly to support. Further, the proliferation of regulation, the difficulty of finding willing and competent trustees, plus the sheer time commitment needed to successfully run the traditional model has led to new alternatives emerging in the market. 

The Benefits of Sole Trustee Models

One change is the development of the Professional Sole Corporate Trustee, affectionately known as
sole trustee. This has many similarities to the traditional model except that the role of the Trustee Board is replaced by a team of accredited professional trustees from a single firm that run the Scheme in-lieu of the Trustee Board. This team is in effect a “mirror Board” and would still have a lead person (aka the Chair), and others as required to provide broader experience and diversity of thought to the role. 

Although the name sole trustee suggests just one person, in practice several people are involved. For larger schemes this could mean half a dozen or more accredited trustees. 

1) Governance and the Benefits

There are several benefits of a sole trustee. The first is around governance and the benefits are twofold. Governance will be of a high standard. The professional trustee firm will need to comply with sole trustee standards and be laser focussed on compliance and regulatory requirements. A professional trustee running sole trustee appointments will need to stay abreast of the new legislative requirements and make sure that training, knowledge and experience of their trustees are all top notch. Their reputation is a function of these factors and governance is bread and butter to any sole trustee.   

2) Delivery and Operations Consolidated

The second governance-related benefit of using a sole trustee is that the delivery and operational aspects are consolidated across a portfolio of appointments. This means that similar processes and policies are used for all the sole trustee appointments in a portfolio such that the same high standards are applied across schemes. A current example of this is with Effective Systems of Governance (ESoG) and the application and implementation of ESoG across a portfolio rather than at a scheme level and applying the ESoG independently and individually on scheme-by-scheme-by-scheme basis. A happy coincidence of this is that fees for governance can be materially reduced without any compromise on standards. Serendipity in the pensions arena! 

3) Costs

Sole trustee works well for schemes that are struggling with the governance burden and the difficulty in finding trustees to act. It can also help manage some of the costs associated with a pension scheme, particularly as the governance costs should be lower on a per capita basis. Sole trustee will still use third parties to support multiple service lines (administration, actuarial, investment, legal etc.) but experienced, accredited trustees will be focused on value for money from the budgets available and should eliminate unnecessary spend.   

With sole trustee, the sponsor still has an important role to play, and the relationship should be one of collaboration and openness. 

Defined Benefit Master Trusts (DBMTs): Consolidation vs. Control

Taking things a step further, we have Defined Benefit Master Trusts (DBMTs). These work with one overarching trustee board having responsibility for potentially dozens of discrete and separate schemes. The services required for each of these schemes are provided at portfolio level. That is, one administrator for all the different schemes, one actuary for all the schemes and usually one investment adviser for all the schemes. The schemes are run by an executive board that reports into the trustees.   

The main benefits of a DBMT are related to consolidation in that costs and overheads are spread across all the participating schemes such that per capita fees are reduced. Further, the governance standards should be high too, similar to those found in a sole trustee framework, with highly experienced trustees ultimately responsible. The day-to-day operations of the DBMT are delivered by an executive function usually made up of specialists from actuarial, investment and other relevant backgrounds. 

The main downside of using a DBMT is the “distance” between the individual schemes and the ultimate decision makers. In particular, DBMTs will make decisions for the wider good of the participating schemes. 

However, in some cases, decisions made will be to the benefit of some schemes but to the detriment of others. Winners and losers. For example, investment strategy decisions will be made with the benefit of the DBMT as a whole rather than for the specific circumstances of an individual scheme. Individual schemes will have input to the discussions, but ultimately one scheme will find it difficult to heavily influence the decisions made by the executive function and the trustee board. This lack of control for individual sponsors and the schemes they pay for is the main drawback of DBMTs. 

The Rise of Consolidators

Looking at options that are more extreme still, we have consolidators. In many ways, these are a glorified mix of sole trustee and DBMTs. The main benefits again stem from the consolidations of services and costs (the clue is in the name). The main difference here is that the consolidator takes full control of the scheme, and the sponsor is released from any future obligations. 

Whilst the appeal to the sponsor of being freed from the pension scheme can be material, this comes at a cost. Firstly, the consolidator will normally require a “top up” from the sponsor to allow the scheme to move over. So, there’s a pound notes cost involved. 

Further, any future surplus that emerges will belong to the consolidator not to the sponsor. In these days of increasing sponsor access to surplus, paying this all away to a third party may be a difficult decision to take. 

Dalriada.Together Empowering Sponsors and Trustees

Dalriada.Together takes the benefits of all the different models above, combines them and seeks to eliminate the downsides of each option. It uses a sole trustee framework but pools the provision of third-party services. Panel firms are used for actuarial and other advisory roles to ensure every scheme has access to high quality advisory support. Fees are managed carefully through the consolidation of governance, administration and advisory costs. Dalriada.Together retains the individual and bespoke approach of the traditional model with collaborative engagement between the trustees and the sponsor. 

Dalriada.Together offers flexibility and control.  Each scheme is managed with regard to its own unique circumstances and alongside the corporate and scheme individuals who hold interests in how the scheme progresses. The sponsor can be involved as much or as little as it wishes. Long-term objectives specific to each scheme are agreed and delivered. Delivered to budget. 

The graph below shows how the different models compare from a sponsor’s perspective. In particular, it shows how much time or effort is needed from the sponsors under each model and the amount of control the sponsor retains. 

The solutions provided to trustees, sponsors and their schemes should be as wide ranging and unique as the market they serve. The alignment of the sponsor and trustee’s objectives have been proven to be of benefit to the trustee, the sponsor and the members. This collaboration can be harder to achieve when multiple schemes and sponsors are all vying for their own individual outcomes.  

For some schemes and sponsors consolidators or a DBMT might be the right fit. For others the distance this creates is not acceptable and services like Dalriada.Together give economies of scale, robust governance, control and confidence.  

Simplify, Consolidate, Succeed.

Our consolidated approach ensures simplicity, efficiency, and ultimately, success for your pension scheme. Whether you want to learn more about our services or have a specific enquiry, our team is here to assist you every step of the way. Reach out today by completing the contact form above or contact John Burke directly.

Let's simplify, consolidate, and succeed together with Dalriada.Together.

Choose Dalriada.Together for your Pension Scheme.