Dalriada Trustees Limited (“Dalriada”), one of the UK’s leading independent professional pension trustee firms, has today announced the launch of a new consolidator solution for Additional Voluntary Contributions (AVC).
Dalriada ran a procurement process to appoint Gowling WLG and Hymans Robertson as its advisers. A further selection exercise was subsequently undertaken resulting in the appointment of Smart Pension. The solution created, and developed by Dalriada and Smart Pension, aims to provide a commercial alternative in the market to improve value for money and member outcomes compared to the traditional approach and costs offered, where typically charges are at or above the 0.75% p.a. charge cap, invested on legacy platforms with limited communications and have little on-line functionality and options at retirement.
The DCC solution also offers trustees the ability to streamline their operations and risk management in an ever-increasing governance environment. This includes Pensions Dashboards and the expected Pensions Bill relating to decumulation requirements for DC assets.
AVC policies can also impact buy-outs, causing disproportionate delays and fees with little benefit to the beneficiaries or schemes. The benefits also capture the removal of reporting ongoing burdens and administration costs. For employers, transferring the AVCs will remove all annual operating costs and risks for the AVC funds. Transferring AVCs could also potentially decrease the overall administration fees.
Dalriada has been able to create this solution by negotiating on behalf of its trustee appointments, so that the solution operates across the schemes to which Dalriada is appointed as a Professional Trustee, in order to achieve the efficiencies and provide benefits of scale for all AVCs.
This affordable ‘off the shelf’ consolidation solution includes a member charge that is a fraction of the typical AVC charge, irrespective of the size of any individual scheme’s AVC assets. The assets will be invested in a quality default investment, with options for self-selection and decumulation included. Members will also benefit from improved engagement with the solution offering on-line functionality, a dedicated helpline, reduced response times for member queries and improved communications, including a switchback option at retirement where the AVC can be used against the tax free cash allowance and /or purchase added years.
Maddy Frost, Partner at Gowling WLG, said: “We are delighted to have been appointed to support Dalriada on this project. Ultimately, we all do what we do in the DC world with the aim of improving member outcomes and this solution forms an important part of that”.
Brenda Kite, DC Platform Solutions Lead at Hymans Robertson said: “As a firm we believe that offering value for money and improving member outcomes are the key component of any AVC or DC solution. Working with Gowling, Smart Pension and Dalriada has allowed us to collectively pull together our knowledge to create a viable commercial alternative in the market at a lower cost. We believe that, together, our solution is the most effective way to tackle and meet the gap in the AVC and legacy DC market, and offer the very best for their members. We are delighted to have played a role in this revolutionary solution”.
Gavin Collinson, Business Development Director at Smart Pension said: “Smart Pension is delighted to partner with Dalriada on the launch of their market-leading small scheme consolidation solution. Our joint focus is on providing better value for members, reducing risk for trustees and employers, and making sure our members enjoy a comfortable retirement. Given the government mandate for DC consolidation, we’re excited about the possibilities for expanding this first-of-its-kind solution. Together, we’re solving many of the issues faced by the AVC market, ultimately helping more and more people save for a better retirement in a way that suits them”.
James Fitzsimmons, co-creator of the DCC and Accredited Professional Trustee at Dalriada Trustees, said: “Trustees have struggled to improve Additional Voluntary Contributions terms and the investment platforms available to their members due to cost barriers, resource constraints, complexity and lack of a viable market, particularly for schemes that can only negotiate in isolation. We believe our new solution will be the most effective way to tackle this problem. By consolidating AVCs into a DC Master Trust, it will significantly reduce member charges, improve member engagement, and reduce the administration and governance burden for DB trustees.”
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