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Three Minutes With
How can Barnett Waddingham help?
We can help in many different ways. Our independence allows us to flex our offering to meet client needs, whether they be trustees or corporate sponsors. We can help at any stage of the journey from design through optimisation and monitoring to preparing and executing the end. Finally, we're seeing the beginning of a trend for schemes and sponsors to appoint a strategic consultant to work alongside their other advisers and help pull it all together. We can do this too.
Thirdly, there are some things that will need to happen before you get to the end so identify these early and plan ahead. For example, you may need to change your rules to enable your plan to work. Ask all your advisers what these items are and build them into your plan.
Fourthly, once you have a plan you must monitor it properly. This isn't' just about getting a quarterly funding update or even having access to a daily tracker. A good monitoring framework is one that has tailored management information on each of your mission-critical items. Ask your advisers what these are and then monitor them.
Finally, there will be some things that need to happen at the end of your journey plan. If you're heading for buyout for example, you'll need to think about how you're going to identify and then execute the transaction. So ask all your advisers what needs to happen at the end.
The key point about DB Navigator is it's a simple framework that can be adapted to any scheme's circumstances. It's been designed to ensure that your journey plan is joined up giving you the maximum chance of success and avoid unexpected problems along the way.
The key point about DB Navigator is it's a simple framework that can be adapted to any scheme's circumstances
A good journey plan will take account of all the important considerations, not just funding or investment
How can pension schemes ensure their journey planning is fully joined up?
Every DB scheme should have a journey plan. As soon as the scheme is closed, the clock starts ticking. Needs change as schemes mature and planning ahead for this is a good idea.
A good journey plan will take account of all the important considerations, not just funding or investment. Too often I see schemes asking their investment advisers or actuaries to come up with a journey plan and naturally they start with their specialist areas. But this work is often done in a silo.
The problem is that there's so much other stuff that's key to making the journey plan work. It needs input from your actuaries, your investment advisers, your lawyers, administrators, accountants and so on. And it needs to work for both the company and the trustees. For example, if you don't loop in the accountants at the right stage, then you may find you're planning for a buyout that the company won't want to do when you get there.
Getting this right is hard. You need to flush out all the relevant considerations at the outset. That's why we built our DB Navigator framework.
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Its important that defined benefit schemes have a plan in place to meet their long-term financial goals. This could, for example, be buying out member benefits via an insurance company or continuing indefinitely until the last pensioner dies. Different routes require different strategies.
Ian Mills, Head of DB Endgame Strategy at Barnett Waddingham, explains the steps that schemes should go through to define their journey plan and its ensure success using their “DB Navigator” framework.
INTRODUCTION | journey planning | about DB Navigator | Barnett Waddingham | learn more
Barnett Waddingham
about DB Navigator
Journey Planning
INTRODUCTION
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Three
Minutes
With
Ian Mills, Head of DB Endgame Strategy, Barnett Waddingham
Columbia Threadneedle Investments' Sonal Sagar & Michael Hamblett
What is DB Navigator and how does it work?
It's Barnett Waddingham’s way of helping DB schemes to plan for their endgame. Unfortunately, there is no one-size-fits-all solution here as every pension scheme is different. DB Navigator offers a flexible approach that you can use to make sure your journey plan is joined up in a holistic way. It's designed to flush out all the key issues at the outset. This means your plan can be designed to get you to your endgame efficiently, avoiding unexpected challenges along the way.
It's a simple framework to discuss with all your advisers based around five high-level themes. Firstly, everyone needs to be on the same page about the destination. There's no such thing as a plan without an objective so start there. Not all of your advisers will be able to help you decide on every aspect, but all of them should know where the scheme is going.
Secondly, you need to develop and optimise your plan. This will need the input of all your advisers. You should consider all four of the levers at your disposal to close the gap to your target: investment, contributions, member options and time. Optimising the plan is about finding the right setting for each of these levers and will depend on your specific circumstances.
Coats Group makes thread, which is an energy and water intensive process, but essential for clothing, footwear and other industrial applications. Coats is attempting to make the process greener and more sustainable by targeting reductions in water consumption and carbon emissions. The company has also pioneered a fully recycled thread, using no virgin plastic.
This is an example of the type of company we look for in the Threadneedle UK Sustainable Equity fund: a company that is perhaps under the radar, but a leading player in a fragmented market, standing to benefit from consumer trends towards sustainability.
We met the company’s head of sustainability to understand how its non-financial risks and sustainable opportunities are managed, and our opportunity to ask questions and bring the investment case to life, far more than reading the annual report.
Threadneedle UK Sustainable Equity Fund: Portfolio snapshot
Coats Group
Johnson Matthey
Reckitt
Johnson Matthey is a chemicals company that makes solutions for cleaner energy and cleaner air. It has an experienced board and is investing in new and future technologies such as fuel cells and hydrogen. To continue driving its sustainability agenda, this year, it is incorporating ESG and sustainability criteria in executive pay.
Improvements are expected in its top line, margin and cash flow. We believe it is undervalued and, when you combine that with the fact that well over 80% of its revenues contribute to the UN SDGs, it is one of the leading companies within the fund.
To have confidence in our investment, engagement is key. We have met management, board members and collectively engaged with the UN Principles for Responsible Investment on its supply chain. This gives us a better understanding of the risk/return characteristics.
Reckitt is a health, hygiene, and nutrition company. It has had big changes in management and strategy over the last few years and now it is embracing its size and scope, driving more from the group level. As a result, it is well-positioned to effect change.
There is a big focus on how its products are made, with reductions in energy and water usage and more recycling. Reckitt works alongside governments and public health bodies to educate people on issues including cleanliness, infant nutrition, sexual health – this is on top of the positive impact of its products within its hygiene, health and nutrition divisions.
Again, engagement is key: we have met the CEO, CFO, chair, directors in charge of executive pay, heads of sustainability to enable us to get a holistic picture of how the company is improving its management of ESG and sustainability.
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MARKET OUTLOOK
Source: Morningstar as at 31 July 2021, net of fees, based on Z Acc share class (ISIN: GB00BZ21SS97). Net performance using 12pm prices, unadjusted income reinvested. Peer group is IA UK All Companies. The index is a Composite benchmark. The fund launched 30 October 2015. Past performance is not a guide to future performance.
Threadneedle UK Sustainable Equity Fund: Performance (%)
Fund (net)
FTSE All-Share
IA UK All Cos
3yr
5yr
2020
2019
2018
2017
2016
Since Launch
Year to Date
18.6
44.5
-0.5
21.6
-7.0
14.0
6.7
53.4
9.5
6.6
27.0
-9.8
20.5
-9.2
12.4
12.3
38.8
11.7
12.7
44.0
-7.7
21.9
-10.3
13.0
11.7
49.5
12.3
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INTRODUCTION | journey planning | about DB Navigator | Barnett Waddingham | learn more
BARNETT WADDINGHAM
About DB NAVIGATOR
JOURNEY PLANNING
INTRODUCTION
Where can readers find out more?
You can check out the interactive pdf for DB Navigator here.
This is a high level overview of some of the key questions you need to think about in planning your journey, together with some interesting case studies of how we've helped other people like you. Or of course if you prefer, feel free to connect on LinkedIn or email and I'd be happy to chat through any of this with you.
Residual risk
How can Barnett Waddingham help?
We can help in many different ways. Our independence allows us to flex our offering to meet client needs, whether they be trustees or corporate sponsors. We can help at any stage of the journey from design through optimisation and monitoring to preparing and executing the end. Finally, we're seeing the beginning of a trend for schemes and sponsors to appoint a strategic consultant to work alongside their other advisers and help pull it all together. We can do this too.
Where can readers find out more?
You can check out the interactive pdf for DB Navigator here.
This is a high level overview of some of the key questions you need to think about in planning your journey, together with some interesting case studies of how we've helped other people like you. Or of course if you prefer, feel free to connect on LinkedIn or email and I'd be happy to chat through any of this with you.
Learn MORE
It's Barnett Waddingham’s way of helping DB schemes to plan for their endgame. Unfortunately, there is no one-size-fits-all solution here as every pension scheme is different. DB Navigator offers a flexible approach that you can use to make sure your journey plan is joined up in a holistic way. It's designed to flush out all the key issues at the outset. This means your plan can be designed to get you to your endgame efficiently, avoiding unexpected challenges along the way.
It's a simple framework to discuss with all your advisers based around five high-level themes. Firstly, everyone needs to be on the same page about the destination. There's no such thing as a plan without an objective so start there. Not all of your advisers will be able to help you decide on every aspect, but all of them should know where the scheme is going.
Secondly, you need to develop and optimise your plan. This will need the input of all your advisers. You should consider all four of the levers at your disposal to close the gap to your target: investment, contributions, member options and time. Optimising the plan is about finding the right setting for each of these levers and will depend on your specific circumstances.