Four in five industry experts predict that the new DB system will have some effect on their schemes, with a quarter predicting a considerable impact, according to a recent poll.
According to an LCP webinar poll conducted this month, about half expressed concerns about the additional work that will be needed to implement the new regime, with a third of those saying that a new regime is unnecessary and will just add more effort.
Only one in six people thought the new system was good and would increase the security of member benefits.
Meanwhile, one in three people said they hadn’t made up their minds about the new regime yet.
LCP predicts that up to 50 per cent of schemes may presently fail at least one of the Fast Track tests, and they are advising trustees and sponsors to evaluate how they measure up to the new standards and determine whether they need to take any more action.
LCP suggests a number of potential next steps, including reviewing the investment strategy in case it cannot be sustained under the new regime, taking into account potential new regime-related restrictions on the sponsor’s operations, reevaluating the covenant support, including the value of group guarantees, and responding to the consultation. As they are expected to be disproportionately impacted by the new regime, schemes that are open to new members may very well desire to do this.
LCP chair of the webinar and head of trustee consulting Jill Ampleford says: “The impact of the new DB funding regime can be very different depending on each scheme’s unique position. Many will see not just a change in funding but changes in investment strategy and the approach to assessing covenant support too.
“But for all schemes there will be some work to do. We’re encouraging trustees and sponsors to do the work as soon as possible to understand what the new regime means for them.”
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