Photo of Chris Comerford

Two liability management options we are seeing considered more and more frequently by Irish sponsoring employers of defined benefit schemes are pension increase exchange exercises (where members agree to forego an entitlement to increases on their pensions in the future in return for something now, for example, a higher starting flat pension) and transfer out exercises (where members agree to an enhanced transfer value in lieu of a future pension promise and transfer out of the scheme).

The rationale for these types of exercises is that liabilities are crystallised at the inducement date and risk of future adverse experience (for example, higher index-linked increases than estimated or adverse investment experience) are eliminated from the scheme.  An enhanced transfer value will usually be more than the statutory minimum funding standard but less than the equivalent of the cost of buying out the pension with a deferred annuity.  The funding position of the scheme and financial position and prospects of the sponsoring employer will drive this.  A key risk, of course, is that members do not fully understand what they are being asked to give up and seek to challenge the inducement exercise in the future.


Continue Reading Inducement exercises – Five common hazards

Photo of David Francis

The continuing economic crisis sees those with responsibility for pension schemes faced with a number of complex issues. There are a number of core issues which we are seeing consistently arise. These include the following:

  1. Check the Power of Amendment
  2. Check Employment Contracts
  3. Check the Effect of the Change
  4. Conflict, Confidentiality and Consultation
  5. Obtain Advice


Continue Reading Managing Occupational Pension Schemes in Crisis: 5 things to Consider