Investment - Articles - Paper exploring the alternative risk transfer market

Hymans Robertson has published its new paper “A Closer Look at Capital Backed Journey Plans” which shows that Capital backed journey plans (CBJP) are becoming an increasingly key part of the growing alternative risk transfer market and could provide schemes with a lower risk means of meeting their long-term objectives.

 A Capital Backed Journey plan is an option to strength a pension scheme’s plan leading to better funding. Under a CBJP arrangement, schemes are able to access external capital for a set period of time to increase the likelihood that they are able to provide the pension as promised to their members.

 In the paper, the leading pensions and financial services consultancy shows how a CBJP provides trustees with access to external capital to support their endgame. It examines the alternative risk transfer market covering how CBJPs work, how they can help schemes and why they are a worthwhile option for providers.

 Commenting on the ‘Closer look at Capital Backed Journey Plans’ report, Iain Pearce, Head of Alternative Risk, Hymans Robertson, says: “Capital backed journey plans are a new way of accessing third party capital to help secure members’ benefits and reduce the chance that a contribution will be required from the sponsor. They can reduce the scheme’s reliance on the sponsor to fund losses, as well as help protect members’ benefits and enable schemes to reach their target outcome faster or with more certainty.

 There’s a growing list of Providers now actively targeting transactions, or quietly developing their offers in this area. These cover a range of strategies of different models which could create some opportunities for early movers.

 “It’s great to see this market development and we expect an increasing number of transactions using Capital Backed options in the coming years. Trustees and sponsors will become increasingly comfortable using these options to help meet their objectives. They should seriously consider whether CBJPs can help them meet their objectives as part of their strategic reviews.”

 A copy of the Closer Look at Capital Backed Journey Plans Paper can be accessed here

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