The completion of the first new capital backed structure is being discussed widely in the pensions industry. We are considering these with interested clients and believe that there is a prospect it will be a significant new option for schemes to explore on funding.

We recognise that every case will need to be decided on its facts, with the central touchpoint being is the proposal aligned with the trustee's fiduciary duties to act in the best financial interests of members?

There will of course therefore be the need for audit, appropriate dialogue and advice on covenant and also on the enforceability and terms of any proposed new capital back structure.

Where these criteria can be met, our general approach is that it must be best for there to be a greater range of options available in the market for schemes to have a prospect of materially improving their funding levels.

My sense is that some might oppose capital providers and other non buy out funding options as they are adverse to the concept that the provider is intending to make a profit from the proposal.

However, it is of course also the case that insurers require a profit margin in their buy in and buy out offerings. Also if buy out is not possible for a scheme, they will commonly seek to improve funding levels by investing in risk based assets. Again the investment adviser and underlying funds will charge significant fees. In addition there is the prospect that reliance on risk based assets alone can potentially expose a scheme to greater risk than a capital provider's investment approach, again depending on the facts of each case. This relative investment risk between the options will be an area requiring specialist financial advice.

Also the capital provider solutions can be tailored and include flexibility in design, including the nature of the ongoing link with the scheme employer.

In short, whilst we recognise that any decision to involve a capital provider will require substantial due diligence and consideration of alternatives, for example contingent assets, we welcome more choice for pensions schemes generally.