Confused with collateral? Lost with leverage?

Confused by collateral calls? Lost with leverage or haunted by hedging? The recent gilt market volatility has been very serious, but with the help of industry experts, fortunately, many schemes are managing to navigate away from the worst case and keep member benefits' secure. But the current crisis, this time putting the hugely trusted area of defined benefits (DB) pensions in the mainstream media, highlighted the huge complexity of DB pensions.

For lay scheme members, we suspect that if you weren’t confused, you might not have picked up on the implications of what was happening? The talk of defaulting on derivates can only have brought concern for some about the security of their pension income. So its important schemes must take the time to communicate with their members and provide them with the necessary reassurance.

We must not forget that this has also been a challenging period for trustees, particularly for those for whom pension management is not their primary job. Understanding these issues takes time, but on this occasion, the pensions world isn't moving slowly, and at present, time is of the essence. This has highlighted the need for expertise on trustee boards to make the right and swift decisions. Without this, the contributions made by sponsors to back members' benefits could be at risk.

This all is coming at a time when the wider DB investment market has been increasing in complexity, and the governance standards required of trustee boards have been accelerating at an incredible pace. When GMP equalisation is thrown into the mix, trustees face greater challenges and increased time commitments in order to deliver the best for members. All of this comes at a time when we now see the majority of DB schemes no longer open to accrual, and those with DB expertise at a company level now looking to start drawing their pensions and stepping away from their pensions and/or trustee duties.

Citrus can provide an answer to these challenges. Citrus is a leading DB master trust that provides sponsors of smaller DB schemes with a safe home for their scheme. Citrus is run by professional trustees whose primary expertise lies in pensions. They are fantastically placed to make the right decisions quickly; saving money for both the scheme and sponsor and safeguarding member benefits. In addition, their governance expertise means you can be comfortable that your scheme will be looked after to the standards expected by The Pension Regulator. The scheme's multi-employer nature means that any required governance developments are delivered at a reduced cost due to Citrus's ability to capitalise on its economies of scale and high-value service.

The Government also agreed with Guy Opperman, former Parliamentary Under-Secretary of State for Pensions and Financial Inclusion, who stated in relation to consolidating small schemes into a DB master trust – “Consolidation is key to achieving value for money – driving lower costs and opening doors to wider investment opportunities.”

Please get in touch with us if you would like to discuss more on the topics raised in this article.