Stoneport, a ground-breaking new pension solution, could enable cost savings in excess of £40 billion if all small Defined Benefit (DB) schemes in the UK were to adopt its innovative approach.
Purpose-built to address the growing number of problems facing trustees and sponsoring employers of small schemes, Stoneport launches today to target running cost, investment management and end-game efficiencies, as well as improving governance standards.
DB schemes entering this consolidator will see security dramatically improved, increasing the chance of members receiving their benefits in full to more than 99%.
Small DB schemes, those with less than 1,000 members each, are responsible for providing the retirement benefits of almost one million members, but these individuals are split across some 4,350 different schemes, nearly all separately administered. Along with increased legislative pressures and a lack of scale to run efficiently, small schemes end up shouldering running costs of more than £1,000 per member, per year. This compares to less than £100 for the largest schemes.
Created and managed by Punter Southall, with actuarial, administration and investment advisory services provided by Barnett Waddingham, Stoneport is the first to offer a solution targeted at those schemes with the greatest need, and who stand to benefit the most from consolidation.
Punter Southall’s own small DB pension scheme has already joined Stoneport.
Richard Jones, Chief Executive at Stoneport, said:
“Despite the best intentions of regulation to protect members’ retirements, this alone cannot address the fundamental issues with the Defined Benefit market. For many schemes, the cost of simply meeting red tape restricts them from being able to run as well as they should do. Consultants have done their best to look after clients, but the panacea to the problems requires a wider solution to address the inherent structural issue of sub-scale schemes.
“We feel passionately about the need for innovation to address this, which is why we have developed Stoneport, easing the burden on trustees, letting employers get back to running their business, and allowing members to relax in the knowledge their benefits are appropriately safeguarded.
“Stoneport harnesses strength in numbers to deliver demonstrable savings to businesses and a better future for smaller pension schemes’ members.”
Jonathan Punter, Chief Executive of Punter Southall, said:
“Compliance costs are a huge burden on small schemes. By joining Stoneport, the costs of running our scheme will fall to just a few hundred pounds a member a year, rather than well in excess of a thousand pounds a year that we currently pay for each member.
“As an employer, I want the members of my scheme to be well looked after, and to have access to the information they need to make informed choices. Stoneport’s scale and resources will enable small schemes like ours to transform their members’ experience from one too often focused on simply dealing with the necessary red-tape, to a best-in-class experience. The professional set-up and strength of Stoneport takes away a significant burden of responsibility from me, freeing my time to focus on running our businesses knowing a stronger employer means a stronger scheme.”
Small schemes wanting to benefit from Stoneport’s transformational improvements will need to join before 31 December 2022. By this date, Stoneport aims to complete its consolidation process, by pooling together the assets and liabilities of all its employer schemes to form one larger, robust scheme. In turn, this provides full benefits of the cost and risk reductions that its unique structure can bring, along with its other associated benefits.
Stoneport anticipates consolidating around 100 or so small schemes, but by modelling the impact its approach could have if adopted by all of the 4,350 small defined benefit schemes in the UK, savings would exceed £40 billion. Lifetime running cost savings alone would total more than £10 billion, on top of reduced investment management costs, the benefit of a ‘good governance’ return boost, and the bulk saving joining together as one would achieve for its end goal of a buy-out in the insurance market.
Existing consolidation options, such as DB Master Trusts, retain individual scheme independence and therefore cannot offer the level of cost saving Stoneport does, or the benefit security enhancement it provides.
Stoneport has developed a modeller for schemes to enable them to understand the cost savings they could achieve by joining. The modeller estimates lifetime running cost savings for schemes based on their individual circumstances, by considering the expected costs in Stoneport compared to the costs actually paid by the scheme today.
The table below shows the results for three real schemes of different membership sizes benefiting from Stoneport:
|Scheme 1||Scheme 2||Scheme 3|
|Number of members||50||215||627|
|Running cost saving over Stoneport's lifetime||£1.3m||£2.3m||£9.1m|