Defined benefit pension liabilities represent one of the most frustrating and intractable problems facing many Finance Directors in the UK today. Whilst the rise in AA corporate bond yields since mid-2007 due to the ‘credit crunch’ will have resulted in many final-salary schemes now having an accounting pension surplus, this may well prove illusory if yields return to pre-crunch levels and rising life expectancy is increasingly taken into account. Also of concern will be the inherent volatility of the pension numbers and the ability to recognise any pension surplus on company balance sheets.

The challenge is to plan the most effective, affordable and secure way to tackle the problem, involving all the stakeholders. Xafinity Consulting can help, by enabling companies to plan the reduction or elimination of their defined benefit pension liabilities, as well as reducing balance sheet volatility, using our unique automated scenario planning environment – Model Solutions for Pension Liability Management.

Utilising our interactive pension scheme software Model Solutions, our actuaries work closely with trustees and plan sponsors to devise a funding plan suited to each scheme - within the constraints of legislation. We use plain English believing that clarity is as important as accuracy in the delivery of actuarial advice.

Our actuarial services include:

• Pension Fund valuations
• Advice on contributions and Contribution Schedules
• Impact of benefit changes
• Advice to employers on accounting for pensions

Nowadays it is more important than ever for the separate roles of the Trustees and the Employer to be recognised. This is especially so in situations that involve negotiation, such as:

• Agreeing the contribution rate
• Sales and purchases
• Changing the benefits

Xafinity Consulting has developed a range of strategies for dealing with such situations.

Sometimes the dynamics of the situation are such that we can only act for one party or the other. More often than not, however, the interests of the Employer and the Trustees are sufficiently closely aligned – with the joint objective of keeping the pension scheme in operation and affordable – that they are able to give the actuary a “joint brief”.