Scheme funding solutions

With historically high deficits and scheme sponsors looking to balance the needs of all stakeholders, there is continued demand for innovative scheme funding solutions to augment cash contributions.

Scheme sponsors have multiple stakeholders to consider when allocating scarce resources. This can sometimes mean that the cash contributions which pension trustees would ideally receive cannot be committed to over a sustained period of time.
There are several ways in which member security can be improved in such circumstances. This can include mechanisms to provide the scheme with either:

  • Downside protection – where value accrues to the scheme in pre-defined downside scenarios (e.g. security over an asset)
  • Upside sharing – where the scheme receives additional contributions if the performance of the sponsor is better than expected or above a certain threshold

Innovative solutions such as asset-backed funding, dividend or earnings linked contributions, security, and parental guarantees can all assist in building a funding solution which works for both the employer and the scheme members.

At Lincoln Pensions we understand the fine balance between supporting the sustainable growth aspirations of the employer and protecting member benefits. We have developed many innovative funding solutions for our clients which achieve both of these objectives today as well as providing flexibility for the future.

 

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