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Stoneport: a new, safe haven for smaller DB pension schemes

Mystery over.

As part of our efforts to let the market know that we were planning something in the area of pension scheme consolidation, I mentioned in my last blog that we would be announcing something this week.

 

To this end, we have duly launched Stoneport Pensions, which provides a consolidation opportunity for smaller defined benefit pensions schemes.

 

Now that we’ve told everyone about it, I can add a bit more detail.

 

Before I do, I should point out that I rarely use this blog directly to promote our latest ventures so I think I’ve earned the right to do so at least this once!

 

Immediate solution for sponsors and trustees

 

If you’ve seen our online launch, you’ll know it took two years to bring to life. Its development was informed by our very substantial collective experience. It addresses two central issues which have a major impact on smaller defined benefit schemes.

 

The first is managing the risk of failing to pay members their benefits in full, which is what typically happens when the employer goes under and is no longer around to support the scheme.

 

The second is the cost of day-to-day running, which disproportionately affects those smaller schemes with fewer than 1,000 members.

 

Stoneport is a unique solution which will reduce the risk of those benefits not being paid to less than one per cent.

 

And it will also cut day-to-day running costs by up to 80 per cent.

 

Covenant combination enhances security

 

What’s the difference, some of you may ask, with what we’re doing and the established market in DB master trusts?

 

Like many existing consolidation options, Stoneport pools the assets of separate schemes. There’s a further innovation, however. It also pools the liabilities and combines the separate employer covenants.

 

A larger asset base means you can access more diversified investments to match liabilities more closely, while bringing those liabilities together also means less risk. The real transformation comes from pooling employer covenants, bringing additional strength and security to scheme members.

 

Greater certainty that benefits will be paid in full, together with dramatically reduced running costs both address the immediate, main difficulties with which sponsors and trustees currently grapple.

 

Long-term target date set for exit

 

Stoneport also offers a long-term solution by moving towards a buy-out in 2046. This recognises the direction of travel of many smaller schemes with no current plans to discharge their liabilities (either through an insurance company buy-out or a transfer to a superfund) but which are, at the same time, shaping for an eventual exit over a longer period. In the meantime, benefits are more secure, running costs much reduced and governance is improved.

 

Flexibility for employers

 

Many employers crave contribution stability and Stoneport provides a haven to achieve this. It has been structured to give employers the flexibility they need to tailor their approaches to reaching its joint funding goal. We expect that most employers considering joining will be able to maintain their existing level of contributions and won’t have to pay any more overall to meet Stoneport’s buy-out target.

 

Our business has always been about solving problems creatively and this is the latest example of that principle.

 

Indeed, the first scheme in Stoneport Pensions is our own, one we took on as part of an acquisition almost 20 years ago.

 

In the course of our careers, we’ve identified common challenges facing funds of this size, which have ratcheted up over time. We are confident that Stoneport offers the definitive, custom-built answer.

 

Where can I find out more?

 

Stoneport is now open for business. Go to www.stoneport.co.uk for any enquiries or questions.

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Stoneport addresses two central issues which have a major impact on smaller defined benefit schemes: risk and cost.

Together we're stronger

Stoneport is for smaller defined benefit schemes who are looking to take effective action to dramatically reduce their costs, whilst materially enhancing the benefit security and outcomes for their members.

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After 40 years of experience in the pensions world, I'm sharing my insights.