Employers with small defined benefits pension schemes could save up to 80 per cent in running costs and transform governance to achieve better outcomes for members by joining Stoneport, Punter Southall’s latest innovation.
Stoneport also tackles financial risks, which could harm the retirement plans for many, as well as mushrooming compliance and regulatory pressures.
Designed specifically for schemes with fewer than 1,000 members, it intends to sign up 100 schemes by the end of 2022.
Each of the UK’s 4,250 schemes of this size pay for actuarial, administration and management services when they could be joining forces to achieve economies of scale in Stoneport.
Stoneport Chief Executive Richard Jones said: “Regulatory pressures and costs for employers and trustees managing these schemes have been mounting for years. The market has been crying out for a fresh approach, so we created Stoneport. Existing consolidation options, such as master trusts, cannot offer the same savings or secure benefits in the way we can.”
He added that harnessing strength in numbers means spreading fixed running costs over a much bigger membership to deliver savings of up to 80 per cent, reducing the cost from hundreds to around £200 per member.
In the meantime, Stoneport’s independent professional trustees take on the burden of managing governance.
Through its diverse composition of schemes from different sectors, it also reduces the biggest risk facing DB schemes: the possibility of the employer going under, leaving the pension scheme exposed.
At the same time, Stoneport’s desired scale opens the door to more sophisticated investment and potential returns through diversifying and matching liabilities in a way currently out of reach to these schemes. The same is true for access to ESG investment.
Punter Southall’s own pension fund is the first to join Stoneport.
Punter Southall Chief Executive Jonathan Punter said: “The costs of running our scheme will fall to just a few hundred pounds a member a year, rather than the £1,000-plus. Stoneport will enable other small schemes to transform their members’ experience from one too often focused on simply dealing with the necessary red-tape, to a best-in-class experience at a much-reduced cost.”
Stoneport aims to complete its consolidation process by December 31st, 2022 by pooling together the assets and liabilities of schemes to form one larger, robust scheme.
This will release projected savings and bolster protection against risk, ahead of the ultimate objective of securing a buy-out with an insurance company of the combined liabilities by 2045.
Stoneport’s modeller found that if each of the 4,350 schemes were to join, they would collectively save £40 billion by the time the planned buy-out came to fruition.