Along with the complexity of running their businesses, employers often have to provide a range of pensions and benefits that deliver what employees need now, and in the future, in a way that is affordable, flexible and manageable for the organization. Employers also play an important role in ensuring their workforce are fit, healthy and financially prepared when they stop working. Offering a broad range of benefits – including an innovative pension solution – that considers the needs of all employees encourages staff retention and motivation. It could also improve productivity or impact the long-term growth and resilience of an organization. We work with clients to find an optimal pension solution – helping them choose between defined benefit, defined contribution or a combination that aligns to the needs of individuals – while keeping a keen focus on the long-term sustainability of the business. We also help both companies and trustees to manage their legacy plans effectively, in a way which supports their institutional objectives.
As an employer, plan sponsor or trustee, it is important to have the latest insights and investment research at your fingertips. Here are some useful resources:
Speaking to a specialist can you help you build a pension strategy that is aligned to your objectives. It can also help increase the speed of decision-making and reduce risk and the burden on internal resources.
Implementing a pension solution could help reduce costs, manage risk, use fewer resources and build a resilient benefits program for current, former and future employees.
We can help you design and execute efficient, flexible retirement programs, while managing legacy risks. We design customized plans, such as hybrid arrangements, which can be tailored to your specific workforce. We can work with your benefits team to incorporate a retirement plan into your overall package in a way that supports your business objectives. For existing plans, we help you to define a roadmap to manage costs and risks.
We can help you formulate and build a pensions and benefits strategy that supports current, former and future employees to enhance your company’s long-term resilience, while managing risk and expense. We can help you decide if it makes sense to manage your plans internally or collaborate with Mercer to potentially benefit from a centralized governance model and economies of scale.
With a long-term plan that can dynamically adapt to market volatility or evolve as your own circumstances change, we aim to help you seize opportunities within your pension plan. Whether your objectives are managing risk, reducing costs, implementing effective financing or maximizing member outcomes, we can put a plan in place to help achieve your desired goals.
Maturing LDI portfolio
Repurposing longevity swap
Cost efficiencies
Enhanced strategy and sophistication
A bank-sponsored UK DB plan was seeking to ensure its pension fund members’ long-term security. It had a maturing liability-driven investment approach, with a portfolio split between well-matched government bonds and investment grade corporate credit. As the sponsor was keen to manage its capital base, it had implemented an innovative asset backed funding (ABF) arrangement, using loans to help fund and secure the gap between technical provisions and levels demanded by IAS19. Working collaboratively with the sponsor, the trustee also implemented a pensioner longevity swap to hedge out its largest remaining risk, while continuing to build funding from the ABF.
The plan needed to clarify whether it could afford an insurance solution to secure its members’ long-term benefits. We helped the trustee replace the existing longevity swap with a pensioner buy-in arrangement, while implementing an assured payment policy (APP) for a portion of the deferred members. This policy matches cashflow and gives the plan the option to convert it into a full bulk annuity arrangement over a defined and agreed period. Alongside this, the ABF was repurposed with a view to ensuring it complements the plan's long-term objectives. As a result of these measures, the plan's risk profile was further reduced at limited cost, while creating the flexibility to bank gains arising from potential future liability management actions, or to convert the APP policy to a buy-in.
Q&A |
|
|---|---|
Q |
I am responsible for pension plans in multiple countries, how can Mercer help me? |
A |
We are a truly multinational organisation and can support you in many ways including via our global actuary, global accounting consolidation and global investment functions. We have colleagues familiar with local legislation plus group accounting (include reference to IAS19 and FAS87?) and local GAAP measures, with a streamlined reporting approach. |
Q |
I want a holistic approach to managing my pensions and benefits, is this possible? |
A |
Of course! We understand that our clients want to consider the whole employee package, and pensions are only one part of this. We have advisers trained in flexible benefits (including Global Benefits Management) and access to technology to help you to implement employee packages, if required. |
Q |
What experience does Mercer have with regards to pensions risk transfer? |
A |
Mercer is one of the leading advisors in all types of risk reduction exercises (including buy-in, buy-out, transfer to captive reinsurance, individual lump sum settlements, other risk reduction measures). |
Q |
Is a captive right for me? |
A |
A captive may benefit those plan sponsors in particular that would like to regain control of investment strategy and/or where any surplus in the plan would likely be of little or no benefit to the sponsor. The captive acts as a reinsurer of pension obligations (or other risks) transferred to a local fronting insurance company. A reinsurance captive does require significant capital, and also ongoing management time and costs, and so is certainly not right for all plan sponsors. |
Q |
What part do pensions play in mergers and acquisitions? |
A |
The impact which pension schemes have on the sale or purchase of an organisation can differ by country, but this is something which we can guide you through. In many cases the value of the liabilities transferred can be significant in the context of the overall business value. In addition, the sale may trigger additional cash requirements and changes to benefits. Please contact Konrad.deiters@mercer.com to discuss what impact this may have on your business plans. |
Q |
My pension costs keep escalating. How do I keep them low? |
A |
The legislative landscape for pensions is varied and complex, which can lead to increasing contributions, administration and governance costs. We can help in a number of ways – by managing the risk/reward payoff within your plan assets, setting the right level of company contributions, ensuring effective communication and modelling tools, and even providing efficient outsourcing directly for your governance and investment management needs. |
*The case study is an illustration of Mercer's capabilities provided to one client. Client results will vary and there can be no guarantee of similar results.
References to Mercer shall be construed to include Mercer LLC and/or its associated companies.
© 2021 Mercer LLC. All rights reserved.
This content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without Mercer's prior written permission.
Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax or legal implications.
This does not constitute an offer to purchase or sell any securities.
The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed.
For Mercer’s conflict of interest disclosures, contact your Mercer representative or see http://www.mercer.com/conflictsofinterest.
This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances. Mercer provides recommendations based on the particular client's circumstances, investment objectives and needs. As such, investment results will vary and actual results may differ materially.
Information contained herein may have been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.
Investment management and advisory services for U.S. clients are provided by Mercer Investments LLC (Mercer Investments). Mercer Investments LLC is registered to do business as “Mercer Investment Advisers LLC” in the following states: Arizona, California, Florida, Illinois, Kentucky, New Jersey, North Carolina, Oklahoma, Pennsylvania, Texas, and West Virginia; as “Mercer Investments LLC (Delaware)” in Georgia; as “Mercer Investments LLC of Delaware” in Louisiana; and “Mercer Investments LLC, a limited liability company of Delaware” in Oregon. Mercer Investments LLC is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer Investments’ Form ADV Part 2A & 2B can be obtained by written request directed to: Compliance Department, Mercer Investments, 99 High Street, Boston, MA 02110.
Not all services mentioned are available in all jurisdictions. Please contact your Mercer representative for more information.
Certain regulated services in Europe are provided by Mercer Global Investments Europe Limited and Mercer Limited.
Mercer Global Investments Europe Limited and Mercer Limited are regulated by the Central Bank of Ireland under the European Union (Markets in Financial Instruments) Regulation 2017, as an investment firm. Registered officer: Charlotte House, Charlemont Street, Dublin 2, Ireland. Registered in Ireland No. 416688. Mercer Limited is authorized and regulated by the Financial Conduct Authority. Registered in England and Wales No. 984275. Registered Office: 1 Tower Place West, Tower Place, London EC3R 5BU.
Investment management services for Canadian investors are provided by Mercer Global Investments Canada Limited. Investment consulting services for Canadian investors are provided by Mercer (Canada) Limited.
Africa
