Pension schemes trustees and sponsors should be "careful" and evaluate the range of settlement options, Broadstone has said, after recent "dramatic" improvements in the funding landscape introduced several new options for managing long-term settlement of liabilities.

Broadstone published a report, settlement options for pension schemes, examining these options including, insurance, scheme run-on low-risk and higher-risk, commercial consolidators, and public sector consolidator (PSC).

The consultancy suggested that alongside the newly published DB Funding Code from The Pensions Regulator focusing on long-term funding and investment strategy planning, there is renewed impetus on end-game planning.

The report was therefore designed to help trustees and sponsors make an “informed” decision about the long-term settlement of their liabilities, noting that there is an "ever-wider" range of opportunities for schemes to consider.

Broadstone clarified that the best option for each scheme would depend on its particular circumstances, warning that trustees and sponsors must be careful to take advice that covers all the options available.

Commenting on the report, Broadstone head of consulting and actuarial, Nigel Jones, said: “We firmly believe there is room in the market, and demand from schemes, for a whole range of competing solutions. 

“We welcome the developments in the risk settlement space as outlined in our report: innovation and increased capacity from insurers, the introduction of commercial consolidators and the potential launch of the PSC are all encouraging news for sponsors and trustees of defined benefit (DB) schemes looking to secure benefits.

“It is inevitable, though, that given the continuing increase in demand, expanding existing solutions and adding new ones are vital to meet the needs of trustees and employers.

“The absolute size of UK DB pension liability is enormous, and we are of the view that all solutions will find sufficient interest to thrive together in the market.”

However, Jones said that the Pension Protection Fund (PPF), which is expected to run a PSC, “already provides a blueprint for how a PSC can be delivered at scale”.

“They have an established track record, with nearly 20 years’ experience of consolidating over 1,000 schemes, albeit with a different entry test,” he added.

“Their size allows for significant economies of scale and could help demonstrate what could be achieved if a visionary approach was employed.”

Jones stated that a PSC would be a “welcome” addition and part of the solutions set for a very large market.

“In our view, it could be structured to leverage the experience and scale of the PPF, benefit the wider economy, result in more competitive pricing and ultimately lead to materially better member outcomes,” he concluded.

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