Turning DB pension risk into opportunity for a public services client

Bron Afon is a social housing association providing homes and supporting communities across South Wales. It required support managing its Local Government Pension Scheme (LGPS) exposure and accessing scheme surplus to rebalance discrepancies in employee benefits.

By tackling risk and uncertainty head on, Isio guided Bron Afon to a position of financial confidence and sustainability going forward.

The challenges the client was facing

• The financial risks attached to running the scheme were potentially jeopardising Bron Afon’s core purpose as a social enterprise that makes a profound difference in local people’s lives
• Bron Afon was managing a volatile Defined Benefit pension scheme liability on their balance sheet with uncertainty that was out of their control
• The LGPS valuation exercise of 2022 meant the required level of contributions was set to rise fourfold
• Changes in market conditions left the DB scheme in surplus

The thinking in response

• Isio’s approach was to keep the goal of delivering financial confidence for Bron Afon and its employees always front and centre
• By first taking a step back and reviewing the overall pensions offer, we were able to identify innovative pathways to remove their DB risk, access the surplus and ‘rebalance’ pensions for their people across the board
• Communication was key: proactive conversations always focused on value and outcomes
• Our collaborative mindset drove the agenda forward, ultimately turning risk into opportunity and empowering the client

The business value of integration

• From pensions and actuarial advice through to wider reward and benefits, our teams offered an holistic strategy that prioritised an overarching concept of value, rather than looking at DB financing in a silo
• Our Communications team also led on managing and supporting employees through the change

Our solution

• Isio took the initiative throughout: quickly establishing regular communication channels with the fund
• Drawing on our extensive public sector experience, our teams worked productively with stakeholders to explore their unique needs
• The combination of actuarial expertise and constructive relationship management enabled us to develop bespoke alternatives to access the surplus such as partial exit or investment de-risking
• Bron Afon subsequently exited the fund in 2024 with a significant surplus
• The client is now in a position where they are financially sustainable and can operate with confidence around future decisions
• As a result, Bron Afon can focus on delivering its core purpose of supporting its customers and communities by providing quality services

Improvements in financial confidence

• By successfully balancing people, finance and governance, Isio and Bron Afon combined to make brave and bold decisions – turning risk into opportunity
• All of the client’s employees received an uplift linked to the surplus return, positively impacting talent attraction and retention
• Isio provides ongoing support, ensuring that tangible value from reward and benefits is a core priority going forward