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Dynamic de-risking puts car dealer in driving seat to full funding

12 October, 2022
clock 4 MIN READ

A fiduciary management roadmap

A 150-year-old business that switched from manufacturing cars to selling them was seeking urgently to improve the returns its £80m defined benefit pension scheme could generate to repair a worsening deficit.

Trustees were concerned by mushrooming liabilities which threatened to undermine the covenant. At one point, they were six times the size of the corporate balance sheet.

After a competitive tender, SEI created a fiduciary management road map to reach full funding by the end of the decade.

How refining investment improved performance

The client selected liability-driven investment as the key strategy to offset the risk the scheme liabilities posed to its covenant. Trustees had previously relied on the conventional consulting model and approved replacing existing diversified growth and index tracker funds not only with more sophisticated methods but with increased hedging to minimise risk.

Given the deficit had ballooned by £10m to £20m between 2014-16, this decision boosted returns and increased efficiency in service of the aim to secure the scheme’s self-sufficiency.

A key reason trustees enabled this approach was the mandate to act dynamically to de-risk. This meant SEI’s team were not tied to trigger points with the flexibility to change direction and adjust time frames in the best interests of the client.

On the right road

With current returns, at July 2022, at gilts plus 2.7 per cent, the client is on course to reach technical provision levels before progressing to full funding.

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“We’ve always innovated and changed direction in our history if it’s the right decision for the business. Now we’ve made the same call with our pension scheme and it’s making positive progress.”

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Important information 

This document contains marketing material about our fiduciary management service. This document does not represent impartial advice on this service. In certain cases, you are required to conduct a competitive tender process prior to appointing a fiduciary manager. Guidance on running a tender process is available from the Pensions Regulator.

This is a marketing communication. 

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