Lead author Derek Steeden: Capital Backed Funding Arrangements can offer tangible benefits for defined benefit pension schemes to secure member benefits in full: downside investment protection, covenant improvement, access to investment expertise, governance arrangements and potentially assistance to prepare for an insurance buyout or a low dependency strategy.
Arrangements offer distinct benefits when compared with DIY approaches, superfunds, DB Master Trusts and conventional insurance risk transfer policies.
However, there are new risks to consider and this remains a relatively new area with limited standardisation or information in the public domain. It is important to understand how an arrangement works both in the normal course of events, in periods of stress and if the arrangement is terminated.
In this paper we set out a framework to enable an effective initial comparison, assessment and discussion of these arrangements, and to give sufficient introduction to enable the reader to identify appropriate next steps.
IFoA paper on Capital Baked Funding Arrangements
|
