Lorica has set up an actuarial and risk management division to give employers advice and support on how to manage, reduce or eradicate the risks associated with operating defined benefit (DB) pension schemes and other trust based arrangements.
Sean Gilfeather, who has joined Lorica to head its newly-established actuarial team, said: “The ever increasing legislative burden surrounding pension schemes, people living longer, taxation changes for high earners and the exacerbation of these issues caused by the recent recession, have led to DB schemes becoming even more out of favour with an increasing trend in employers closing schemes to new members and accrual.”
Gilfeather added that many employers have legacy DB schemes which pose significant financial risk and constitute a substantial portion of their overall employee benefits spend, sometimes with little or no benefit for their current employees.
“Lorica recognise that DB schemes are now incompatible with modern employee benefits packages and carry substantial risks and financial implications for many employers,” said Gilfeather. “There is a greater need for employers to take action now in order to come up with a permanent solution. Employers with DB schemes are paying substantial fees to advisers and administrators, just to ensure that the DB scheme is compliant with legislation. The DB scheme is in effect just treading water. The employer won’t be getting much return for their money or from their advisers as they are advising the trustees.”
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