Final Salary & Occupational Schemes

Defined Benefit Pensions and Final Salary (FS) schemes are often considered as the best type of pension. (Please visit our product library section if you would like to know more about the different types of group pensions available.) In recent years however, the rules on how they must be funded, together with onerous trustee duties for the employer has led to record numbers of final salary schemes being closed in favour of defined contribution arrangements. Typically they are first closed to new members and later wound up altogether.

Increasingly our clients will ask us to introduce a defined contribution scheme for new members but will still have legacy final salary pension schemes for original members of staff. These can become a huge financial liability for employers and can often cost more to run than entire departments within a company!

Once an FS pension scheme closes to new entrants, and the company focus starts to shift towards a range of pension solutions,  the argument for purchasing services separately from many different suppliers (unbundled) loses validity.

Trustees have a duty of due diligence to ensure that the scheme is run as efficiently as possible, so that employers contributions can be maximised for members benefits.

Jigsaw are helping the trustees of an increasing number of schemes in the £5 – £50 million asset range to review their existing service providers to ensure that the service options now available in the market have been considered.

In our experience both administration and costs can be streamlined by purchasing services from a single provider. Services can then be ‘joined up’ or bundled as opposed to each provider dealing with the current scheme in isolation with the risk that each pulls in a different direction.

By “bundling” the services in this way we would expect the running costs of the scheme to reduce, potentially by as much as 25% whilst providing more appropriate services.

Recent draft guidance from the regulator strongly recommended that trustees of ongoing schemes continually audit member records and ensure documentation is kept in good order. One of the benefits of a move to an integrated provider is that this can all be completed as part of the move rather than incurring additional costs.

We are able to provide a FREE initial review of your existing final salary service provision and all we require is sight of the last actuarial valuation and report and sight of the last set of scheme accounts. All such reviews are completed in strict confidence and there is no requirement to notify existing advisers. Our report will identify areas that cost savings could be made and if later required, we would be pleased to implement a strategy to realise these savings.

For a free, no obligation consultation and review, please contact us on 02380 004444 to see how we can help.

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