Market volatility remains the biggest barrier to endgame for DB pension scheme trustees

id

Market volatility remains the single biggest challenge for defined benefit (DB) pension scheme trustees when pursuing their endgame strategy.

Almost half (46%) of trustees cited this as the main barrier, according to research from Standard Life, part of Phoenix Group. It was also the biggest barrier in 2023.

The research surveyed 50 DB pension scheme trustees of schemes larger than £100 million, exploring their concerns and considerations around their approach to de-risking¹.

It found some striking differences between trustees’ main concerns in 2024, compared with 2023².

In 2024, concerns increased greatly around The Pension Regulator's (TPR's) New Funding Code (which came into force in November); trapped surplus; and attracting insurer interest.

Meanwhile, investment strategy and lack of sponsor engagement were perceived as less of a barrier to endgame than they had been the previous year.

*  Additional options added for 2024

Laying the groundwork

While DB funding levels have proved remarkably resilient to market volatility, these results show that for the second year running, trustees remain concerned about its possible impact when it comes to securing member benefits.

Trustees are also thinking about the changes that come with implementing the new DB Funding Code, which will require schemes and their sponsors to work together to develop a formal journey plan that targets de-risking and full funding on a low-risk basis.

It’s encouraging to see greater confidence in sponsor engagement and investment strategies. However, the fact that there are still barriers underscores the need for careful planning.

Securing member benefits requires more than reaching the required funding levels, and careful planning can help trustees mitigate risks and manage obstacles on their journey to endgame.

For those schemes looking to insurance for their endgame strategy, by proactively addressing their potential barriers, and working closely with advisers and insurers, trustees can set their schemes up for a smooth and successful journey to buy-in or buy-out.

Notes:

¹ Research conducted by Censuswide on behalf of Standard Life, between 7th October 2024 – 22nd October 2024, amongst 50 DB Pension Scheme Trustees, of Schemes larger than £100m.
² Research conducted by Censuswide on behalf of Standard Life, between 28th April 2023 – 9th May 2023, amongst 50 DB Pension Scheme Trustees, of Schemes larger than £100m.