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Funding Strategy 

Defining the funding plan

Meaningful deficit improvements have not materialised despite strong market performance (and employer cash contributions) over the last 10 years. Often this has resulted from a poorly developed framework for funding a scheme.

Zephyrus Partners works with employers to identify their appetite for risk, cash contribution and time horizon of commitment. These objectives form key inputs in developing a sustainable yet flexible funding framework consistent with the needs of employers and trustees. Such a framework, operating hand in hand with investment strategy, is vital to delivering solvency.

The problem: Businesses are often overwhelmed by their defined benefit schemes

  • Economic, financial and regulatory pressures are complex, challenging and time-consuming.
  • Sponsors feel they are on the receiving end of a trustee led process.
  • The traditional and compliance led approach to assessing funding, investment and benefit issues is inefficient.

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7
Technical Actuarial Review
Technical Actuarial ReviewTechnical and compliance focus limits the opportunity for strategic review
Legal Framework
Legal FrameworkThe balance of powers between sponsor and trustees in scheme documents is routinely ignored or misunderstood
Benefit design & employee engagement
Benefit design & employee engagementDefined benefits are often viewed as neither affordable nor sustainable
Fragmented negotiations
Fragmented negotiationsLack of proactive engagement from the sponsor results in a sub-optimal agreement
IAS 19 accounting implications
IAS 19 accounting implicationsAccounting impacts should be a driver when considering the alternatives
Schedule of Contributions
Schedule of ContributionsEmployer contribution obligations often prove very long dated and irrevocable, even after the deficit is eliminated
Ineffective Investment Strategy
Ineffective Investment StrategyRisk management is often not properly understood nor implemented effectively

The need: A clear understanding of the financial issues at stake and the ability to influence

  • A precise understanding of the long term financial impacts, and associated risks, of previous and current commitments. 
  • Thorough awareness of the cost implications of a “standard” de-risking strategy.
  • Recognition of the negotiation levers available to sponsors.

The solution: A fully integrated proposal addressing all key issues with the aim of achieving sustainability

  • We offer access to independent, comprehensive multi-disciplinary advice to enable proper assessment of all relevant issues, and development of strategy and leadership.
  • The key to a successful negotiation is delivering a positive outcome for the business, the trustees and the scheme beneficiaries.
  • With trustees as creditors and employers as debtors, opposing priorities can lead to an adversarial environment. We encourage a collaborative approach in seeking to reconcile the needs of both parties.

 

The result: A win-win outcome and a clearly documented journey plan

  • Scheme beneficiaries benefit from an outcome improving the sponsor support to the scheme while enhancing the sponsor’s flexibility.
  • One integrated agreement formalises the journey to full solvency and clarifies the role of cash contributions, investment returns and benefit policy.