Defined Contribution Scheme Terminations
Only one chance to get it right
Over the last few years, the Defined Contribution (“DC”) pensions landscape has shifted significantly. Millions of new pensions savers have resulted from auto-enrolment (AE). Insurers have developed competitive and effective contract-based solutions.
In the meantime, the Government and Pensions Regulator have raised the governance burden for trust-based schemes. So not only have we seen a shift from defined benefit to defined contribution in the last decade, we’ve also seen a move from trust-based to contract-based defined contribution schemes and the resurgence of Master Trusts. (These latter vehicles will often levy charges which mirror those under contract-based plans, notwithstanding the greater governance burden).
Dalriada will help you and your scheme comply with the new governance requirements. More information on how we can help you successfully govern your Ongoing Defined Contribution Schemes is available here.
However, whilst the DC Trust model remains viable for some schemes, we appreciate that the increased costs mean that many employers will be keen to move quickly to wind up.
What’s needed to complete a DC wind-up?
The skills required to successfully complete a defined contribution scheme wind-up are different from those required to oversee the running of an on-going scheme:
- Wind-up is a one-shot opportunity – any mistakes made during the distribution process cannot be subsequently rectified by utilising scheme assets.
- It requires tight project management – to minimise the time and cost of the process and to ensure that the scheme is not exposed to out of market risk.
- Specific legislation governs the wind-up process – including providing members with options they otherwise wouldn’t be able to benefit from if the scheme remained on-going (e.g. winding-up lump sums).
- Discharge paperwork and member communications – all need to be specifically tailored to ensure an efficient conclusion.
How Dalriada can help
As a leading firm of professional trustee representatives and a PPF Trustee Advisory Panellist, Dalriada can leverage our extensive scheme termination expertise to assist both employers and trustees with the DC scheme wind-up exercise:
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- Dalriada can be appointed either as sole trustee or as an additional trustee with particular responsibility for project managing the wind up process.
- Wind up exercises cost less where service providers are managed appropriately. Our approach to project management is to set challenging deadlines for the various stages to be completed in a timely fashion.
- We utilise our market-leading specialist terminations team with experience at drafting concise, accurate, clear communications and successfully managing the discharge process.
- Key to a successful outcome is an understanding of the broader picture around the employer’s new pension scheme.