View more on these topics

ScotEq says talk to an IFA for DB options

Scottish Equitable is advising firms with active defined-benefit pension schemes to evaluate their options with an IFA before making rash decisions such as closing the scheme.

The company estimates there are around 10,000 active DB schemes in the UK, many of which are at risk of being shut down.

In his latest paper, pensions development director Stewart Ritchie outlines four main options that IFAs can suggest to corporate clients still running these schemes. He categorises these as the drawbridge, iceberg, glacier and nuclear options.

The drawbridge option is to close the scheme to new employees but keep it open for existing members. Ritchie suggests that new employees should be offered a form of money-purchase topped up with an appropriate employer contribution.

The iceberg option suggests employers stop their scheme&#39s benefit accrual but express the frozen accrual in terms of final salary at the time of leaving. In this case, he suggests all employees are offered a money-purchase scheme for further accrual.

The glacier option sees the scheme cease accrual but the frozen accrual would be based on today&#39s final-salary rather than the employee&#39s leaving salary. In this case, every employee is treated as an early leaver.

The nuclear option would see the scheme wound up, with all the liabilities secured elsewhere. Ritchie believes this is the least attractive option.

He says: “As there is no such thing as a standard defined-benefit scheme, detailed advice will be necessary.”

Recommended

Fiona Sharp

Lives: Cambridge, with partner.Born: March 1965.Age: 37.Education: Ashington High School in Northumberland, degree in French language from Bristol University.Career to date: 1984/95 air traffic control officer in the RAF, holding the rank of Flight Lieutenant; 1995/97 financial planner for ProVision (Clerical Medical); 1997/2000 financial adviser at NFU Mutual; 2000/01 IFA at Fiona Price & Partners; […]

Is financial strength important?

The topic of with-profits funds is under the microscope at present for various reasons, including the FSA review.The FSA review has generated five consultative papers which have received mixed reviews. I am not sure why. The documents propose a range of improvements to with-profits which mostly seem very sensible. Indeed, some of the major with-profits […]

Inside edge

Why on earth does everybody rush around with last-minute Isa applications? Why do investment managers set up handy drop-off points up to midnight on April 5 each year? Why do personal finance supplements grow fat with recommendations, statistics and advertisements?Is it because we care so much about investors that we cannot bear the thought of […]

Last post for final-salary scheme

Should we consider winding up our closed final-salary scheme? You have an insured scheme where the investment is via the insurer&#39s with-profits fund and so is protected against adverse stockmarket movements. This has been an advantage as you have not suffered directly the poor stockmarket performance over the last year, unlike some of the schemes […]

Natixis video: Making smarter use of asset classes

Content supplied by Natixis Global Asset Management This video from Natixis Global Asset Management focuses on Active Share. One strategy for the smarter use of equity investments is ensuring you get what you pay for. According to the company, looking at Active Share can give you a better perspective on where performance comes from. Active […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com