Risk control saw scheme strengthen through pandemic

SEI took action the year before COVID-19, which helped the pension scheme of a client in transport and logistics withstand the economic impact and aftermath of the coronavirus. It came through in a stronger position, both in terms of funding and in the improved condition of the sponsoring employer’s covenant.

Steering liability-driven investment

Before the client team won the fiduciary management mandate in 2019, the scheme had not put liability-driven investment in place. In doing so, SEI was able to match more closely asset movements to liabilities, while its growth holdings were further diversified away from equities into alternative assets. These decisions gave the trustees more control when the pandemic struck and cushioned consequent interest rate and inflation movements.

When lockdowns halted global supply chains, they also dealt a significant blow to the covenant of a sponsor in the logistics sector with a sudden deterioration in cash flow. Like others, it paused pension scheme contributions while taking out government loans and furlough payments.

Diversifying to limit downside risk

With a professional trustee in place, the scheme was able to take swift action with SEI and other advisers towards the aim of full funding on a technical provisions basis by 2025.

Now without employer contributions for the foreseeable future, investment still had to generate enough returns and limit downside risk. SEI provided timely updates to the trustees and regulator that the scheme remained on target to reach its goal.

Further towards full funding

From 79% when SEI took on the scheme, funding at time of writing stands at 85%, despite the gap in contributions. The client team is seeking further to diversify and reduce risk through opportunities in alternative assets to reach its full funding objective.

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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