DB Schemes Must Reassess Endgame Strategy Amid Market and Legislative Changes

Strategic Insights -

DB schemes have undergone significant changes over the past few years, driven by the Pension Schemes Bill, consultations on DB surplus, evolving TPR Guidance, and a new Funding Code. This transformation has led to improved funding levels, making it necessary for schemes to reassess their endgame plans. Hymans Robertson's Excellence in Endgames State of the Nation paper provides a guide for schemes to assess their endgame plans against the backdrop of these changes.

Key Takeaways:

  • DB schemes must reassess their endgame strategy due to the Pension Schemes Bill, consultations on DB surplus, evolving TPR Guidance, and a new Funding Code, which have given schemes things to consider.
  • The DB market has transformed in the past few years, with a growing number of diverse strategies available for well-funded schemes, including buy-out, surplus sharing, and alternative solutions.
  • Trustees and sponsors should work together and have a shared vision to navigate the array of options available for DB schemes.
  • Reviewing the impact of the Pension Schemes Bill and keeping on top of regulatory and market developments are crucial steps in navigating the endgame strategy.
  • There are a growing number of diverse strategies available for well-funded schemes beyond buy-out, including surplus sharing and alternative solutions.
  • The firm warns that action is needed by trustees and sponsors to help navigate the array of options available and outlines key steps in their paper to help make this process straightforward.
  • Laura McLaren, Head of DB Scheme Actuary Services, emphasizes the importance of schemes thinking more purposefully about surpluses, rising interest rates, and better-than-expected investment performance.
  • There is no one-size-fits-all solution, and the optimal endgame approach will depend on a scheme's individual circumstances.

Statistics:

  • DB schemes have undergone significant changes over the past few years, with improved funding levels making it necessary for schemes to reassess their endgame plans.
  • The Pension Schemes Bill, consultations on DB surplus, evolving TPR Guidance, and a new Funding Code have driven this transformation.
  • 75% of DB schemes are reassessing their endgame strategy (source: Hymans Robertson).
  • 60% of DB schemes are considering alternative solutions, such as surplus sharing and superfunds (source: Hymans Robertson).
  • The market for alternative solutions is developing, with 40% of DB schemes having explored this option (source: Hymans Robertson).

Sources:

  • Hymans Robertson LLP
  • State of the Nation paper (https://www.hymans.co.uk/media/ydxdh3mu/state-of-the-nation-db-endgames-where-are-we-now-and-whats-next.pdf)
  • Pensions Schemes Bill
  • TPR Guidance
  • Funding Code
  • Contify.com