Aon has assessed the benefits and shortcomings of transferring into defined benefit commercial consolidators, following the government consultation in December last year.
In its DB Consolidation Brochure, Aon outlined that schemes may want to transfer to commercial consolidators, such as Clara-Pensions and the Pension SuperFund, as it discharges liabilities and enables schemes to wind up at a potentially lower cost than purchasing annuities.
It also said that they can provide greater security and commercial consolidator trustee boards include professional trustees, which can provide strong governance.
However, Aon warned that there are some challenges that need to be overcome.
It cited reputational concerns, due to its new nature and the lack of track record, the administration experience and long-term financial strategy has not been assessed.
Furthermore, it can be difficult for trustees to judge whether moving members into a commercial consolidator could provide greater security than their members' current situation.
Trustees will also have to be sure that the sponsor can afford consolidator entry but cannot afford a full buyout, as it said that “it is difficult to see why the scheme should be transferred to a consolidator rather than the scheme simply being run off over time or bought out”.
Commenting on the research paper, Aon head of UK retirement policy, Matthew Arends, said: “Consolidation is a wide term which covers a number of options – most of which have been around for a while.
"But the Department for Work and Pensions’ 2018 White Paper and subsequent consultation highlighted the idea afresh and introduced the idea of both commercial consolidators and a potential framework for their authorisation and regulation.
“The answer for each scheme will depend on its own objectives, goals and circumstances, but overall we think that a focus on improving the efficiency and governance of DB schemes is most welcome and that the resulting focus on getting to the endgame for a DB scheme is also an important development.”
Overall, Aon expects commercial consolidation to be the right answer for only a “small proportion of schemes”, although a “significant market” could be created.
Aon’s paper also discussed some of the other options for DB schemes, including buyouts, buy-ins, DB master trusts and mergers.
NEW BUILD IN FOCUS - NEW EPISODE OF THE MORTGAGE INSIDER PODCAST, OUT NOW
Figures from the National House-Building Council saw Q1 2025 register a 36% increase in new homes built across the UK compared with the same period last year, representing a striking development for the first-time buyer market. But with the higher cost of building, ongoing planning challenges and new and changing regulations, how sustainable is this growth? And what does it mean for brokers?
The role of the bridging market and technology usage in the industry
Content editor, Dan McGrath, sat down with chief operating officer at Black & White Bridging, Damien Druce, and head of development finance at Empire Global Finance, Pete Williams, to explore the role of the bridging sector, the role of AI across the industry and how the property market has fared in the Labour Government’s first year in office.
Does the North-South divide still exist in the UK housing market?
What do the most expensive parts of the country reveal about shifting demand? And why is the Manchester housing market now outperforming many southern counterparts?
In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance, to explore how regional trends are redefining the UK housing, mortgage and buy-to-let markets.
In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance, to explore how regional trends are redefining the UK housing, mortgage and buy-to-let markets.
The new episode of The Mortgage Insider podcast, out now
Regional housing markets now matter more than ever. While London and the Southeast still tend to dominate the headlines from a house price and affordability perspective, much of the growth in rental yields and buyer demand is coming from other parts of the UK.
In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance.
In this episode of the Barclays Mortgage Insider Podcast, host Phil Spencer is joined by Lucian Cook, Head of Research at Savills, and Ross Jones, founder of Home Financial and Evolve Commercial Finance.
© 2019 Perspective Publishing Privacy & Cookies
Recent Stories