De-risking isn’t just a UK issue. Our German, Belgian and U.S. experts have extensive experience in advising on a range of liability management and derisking structures, meeting the specific needs and regulatory requirements of each jurisdiction.
Pension plan derisking is gathering pace in Germany, where particular challenges for employers include:
- managing the risk attached to past service liabilities, particularly in plans with guaranteed (high) interest rates;
- and externalising past service liabilities from internal, unfunded book reserve schemes.
Our German Pensions Group offers a comprehensive range of advice on the laws related to company pension schemes, and on dealing with pension liabilities in the corporate balance sheet. Our experts are market leaders in advising on customized structuring and implementation strategies in relation to the establishment and adjustment of contractual trust arrangements (CTAs). Our German Pensions Group can provide you with comprehensive advice in relation to outsourcing pension liabilities to a CTA, liquidation insurance policies, pension liability reinsurance solutions (Rückdeckungsversicherungen), or the use of pensioner companies (Rentnergesellschaften).
The advice of our Belgian pensions team ranges from local law advice on pension fund governance and assistance in exploring novel and complex pension structures, to the provision of integrated advice on pension plan change management, cross-border pensions issues and transactional assistance on pension issues in M&A deals.
We can help you with design solutions: our experience includes advising:
- a financial institution on the implementation of novel compensation policies aimed at meeting cost containment objectives, including an innovative variable pay plan related to pension plan funding;
- an employee benefit consultant on the reorganisation of its pension plan in Belgium (including conversion of the plan from DB to DC, and advising on dynamic management obligations); and
- a global chemical company on a review of its pension plans in Belgium, Germany and the United Kingdom in order to reduce and manage pension contribution costs.
We have experience in innovative investment options, including advising a large multinational company on different options for pooling pension assets internationally. Our liability management expertise includes advising several clients on the consequences of the insolvency of an insurer and, as a result, the ultimate liability of the employer.
Over the last decade, and particularly in view of market volatility in the last 15 years, U.S. plan sponsors have increasingly sought to implement formal risk management strategies, to limit the financial risks associated with their defined benefit pension plans and to transfer plan liabilities off their balance sheets. Add to that the recent increase in interest rates, other anticipated regulatory changes and the impact of updated mortality tables which are expected to affect liability measurements in 2016 and 2017, and the scene is set for this trend to gather pace.
The spectrum of derisking activities varies and may involve changes in plan design, investments, distribution options and/or transferring obligations to third-parties. Derisking strategies may be customised to meet the needs of a specific plan, plan sponsor and/or economic challenge; the most widespread options in the U.S. include transferring pension plan liabilities to third party insurers by purchasing group annuity contracts and removing liabilities from company balance sheets by cashing out plan participants.
For more details of current options and developments, contact Brian Jebb.