Pensions - Articles - Underpins and better of tests found to be most complex

 With DB schemes increasingly preparing for possible risk transfer projects, the benefit simplifications that might be necessary or desirable to facilitate a transaction are a key consideration and were therefore explored at a recent SPP webinar on the subject.

 The SPP’s expert panel at the event, featuring speakers from Gallagher Benefit Services, Barnett Waddingham, Aviva and Herbert Smith Freehills Kramer, examined a range of benefit simplification issues from those that are difficult or expensive to insure to streamlining options and specific considerations for large and small schemes.

 Over 200 pension professionals attended the event and were asked, “What do you think is typically the most challenging or complex benefit to simplify?”. The responses were:
 
 • In-service - 5%
 • State pension integration, including bridging pensions - 10%
 • Complex pension increases - 10%
 • Underpins and “better of” tests - 75%

 Alison Longman, Senior Consulting Actuary at Gallagher Benefit Services, who chaired the event, said: “Using “Better of" tests to compare different pension benefit options, including the underpin, to decide which provides the best outcome for the scheme member can be a challenging and complex process. So, it was perhaps no surprise that SPP polling demonstrated that pension professionals overwhelmingly feel that underpins and the “better of” tests are the most challenging aspect of benefit simplification – with three quarters of attendees stating this was the case.”