24 May 2018

Research: Perspectives: Consolidation – can it deliver for defined benefit pensions?

This research considers whether defined benefit (DB) pension consolidation – which can reduce inefficiency through economies of scale, improved investment strategies and better governance – is a viable alternative to existing options.

Consolidation – can it deliver for defined benefit pensions? 1

Key findings:

With the exception of very large schemes, there could be advantages for trustees and corporates in reviewing their governance and service provider structure.
There can be financial and governance benefits from outsourcing administration, asset pooling, fiduciary management and/or using a single provider for all services. However, these options come with a loss of control.
Trustees and corporates should consider these pros and cons on a regular basis to determine whether further consolidation would benefit their members, allow them to save costs or take advantage of the economies of scale consolidation brings.
The government is expected to consult on the commercial consolidation framework towards the end of the year.

This Willis Towers Watson research looks at why the existing DB landscape may be ripe for consolidation and whether this is an idea that trustees and corporate sponsors should be looking at now.