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Risk-sharing
The challenge for employers and trustees
The cost of providing a defined benefit pension scheme has become increasingly expensive and unpredictable for sponsoring employers. One of the main reasons behind this is the uncertainty that surrounds the issue of life expectancy. This has led some employers to introduce new risk-sharing arrangements.
There are a number of different longevity risk-sharing models, but they all share the same basic aim, which is to share the risks associated with increasing life expectancy between employers and scheme members.
With risk-sharing becoming more common, trustees may be asked to agree to make changes to their scheme to introduce a risk-sharing arrangement. When this happens it is vital that trustees appreciate the implications for scheme members and the employer and that they understand their role and duties.
How we can help
Our pensions lawyers can help employers decide whether longevity risk-sharing is suitable for their scheme and help them understand what this involves. We can also advise trustees on their role and duties in this context and assist with the process of communicating with scheme members. In addition, we can draft the necessary changes to the scheme rules to introduce the risk-sharing arrangement.
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