Transitioning assets in defined contribution (DC) pension structures is an especially complex task. Yet, to date, transition management is a relatively unexplored area for both schemes and their providers. The challenges thrown up by unitisation and greater visibility require meticulous management, but few schemes currently give due consideration to the ability of their existing providers in this regard.
“DC transitions require a significantly higher degree of project management and a lot more pre-planning.”
John Finch
As DC continues to evolve, transitions will become more commonplace increasing the need for specialist skill. The conundrum schemes will have to overcome is how to pay for that specialist skill within a cost-conscious framework.
“Transitions are becoming really relevant, especially for legacy DC schemes looking to move to a master trust,” argues Ashish Kapur, European head of institutional solutions at SEI, “but also for ongoing DC schemes looking to change managers or enhance their default offering.”
Preparation, preparation, preparation
Compared to its defined benefit (DB) cousin, however, transitioning DC assets is a relative quagmire of operational and investment risks. In a structure where everything has to be unitised the complexity increases manifold. Even before any transition takes place the level of preparation required far exceeds that of a DB scheme.
Before a transition can occur trustees must ensure the complex and lengthy legal process of gaining consent from individual members (where required) has already been achieved, and member records are fully accurate and up-to-date.
Comments