What lies ahead in 2022?
2022 is the year of opportunity for Citrus, DB master trusts and members of small DB schemes (schemes with less than £150m of assets). The stage was set towards the end of 2021, when the PLSA launched self-certification for DB master trusts. As we start 2022, employers and trustees are now able to access the key information on participating DB master trusts, with structure, governance, operations, and the process for joining and leaving the master trust now all readily available. The introduction of this initiative, along with increased press coverage, stands to be hugely beneficial to members of smaller DB schemes. By raising awareness of the benefits of DB master trusts, as well as seeing more small schemes transferring to DB master trusts, we will see outcomes for members improving.
As businesses continue to navigate the impact of COVID-19, we anticipate greater interest in consolidation as a way of managing costs and governance requirements. Many businesses will now be thinking to the longer term, and seeking funding improvements, which can be achieved through accessing the wider, more sophisticated range of investments available through a DB master trust like Citrus.
Governance will be a key theme in 2022, with particular focus on planning for The Pensions Regulator’s new consolidated Code of Practice and the ‘own risk assessment’. With its enhanced requirements and tighter regulations, we expect this to further encourage the move by smaller standalone schemes to consolidate. Consolidating allows companies to benefit from the professionally run, long-established governance arrangements in a scheme like Citrus, meaning reduced company time being spent on reacting to changes to standards and revamping existing governance arrangements.
Schemes and sponsors are also thinking about equalising GMPs, with some early adopters (particularly those working towards full buy-out) already having made good progress in this area. Citrus has laid foundations to ensure GMP equalisation will be delivered in a more cost-effective manner than can be achieved by a standalone scheme, accessing the economies of scale available. This will undoubtedly be an attraction for sponsors, particularly with the further opportunity, once equalisation is complete, to access improved buy-out pricing through Citrus and its multi-employer approach to market.
Finally, further consultation on the new DB Funding Code awaits as we seek clarity of what “fast-track” will look like. Citrus has already adopted the key principles of what the Code will look to achieve, aligning technical provisions funding with longer term targets (at no upfront cost to sponsors), managing investment risk in a controlled, collaborative manner and integrating the funding, investment and covenant pillars. This provides sponsors with the opportunity to take advantage of a funding approach which we expect to already be well aligned with “fast-track”, ultimately leading to the best outcomes for the Trustee, sponsors and members at the lowest cost.
2022 is the year that companies with small DB schemes (under £150m) should take the opportunity to join a DB master trust like Citrus!
For more information on DB master trusts and how Citrus could help your scheme, please contact us.