Marvin OnumonuHymans Robertson has published its State of the Nation paper for defined benefit (DB) schemes, looking at how the sector has changed in recent years and setting out steps for trustees and sponsors to review their endgame plans.
The report found that better funding levels and new laws, such as the Pension Schemes Bill and the new Funding Code, have led more DB schemes to rethink their strategies.
The consultancy said schemes need to start looking at options early, work together on a shared plan, check how new rules like the Pension Schemes Bill will affect their aims, and stay updated on regulatory changes.
Laura McLaren (pictured), head of DB scheme actuary services at Hymans Robertson, said: “The DB landscape has been transformed at an incredible speed in the last few years, and the market today offers a range of options that DB schemes can work towards.
“There is a growing movement for schemes to think more purposefully about surpluses as they become a reality, with rising interest rates and better than expected investment performance.
“With all these factors at play, schemes are now reassessing their endgame strategies and re-evaluating their timeframes and objectives.”
McLaren added: “While the speed of change is to be welcomed, it is important that sponsors and trustees take the time to work together to think about the impact these changes will have on their own scheme, its aims and goals.
“However, that said, it’s also clear that buy-out is no longer the only choice for DB schemes with a much broader spectrum of options available to well-funded schemes.
“With the long-awaited Pension Schemes Bill published last month, and the second phase of the Government’s Pensions Review launched earlier this week, there appears to be no slowdown of innovation, choice and flexibility.”
She said: “While the plethora of changes are to be welcomed, there are now an increasing range of issues that schemes must navigate.
“For most schemes, the final legislation will be the clear deciding factor fleshing out the decision-making required, although proactive thinking about how to steer a scheme should be encouraged.
“While it’s still early to predict how these changes will impact DB schemes and the market in the longer term, it is interesting to see, even in the short term, the impact the changes have had on the DB market.”
She added: “Within the insurance space, we have seen the market innovate to respond to growing demand.
“Similarly, the market for alternative solutions continues to develop and we are pleased to see the dial move forward around superfunds as part of the Pension Scheme Bill.
“It’s important to remember that there is no one size fits all solution – the optimal endgame approach will very much depend on a scheme’s individual circumstances.
“The landscape is continually evolving, and we would support early planning to help schemes seize opportunities as they arise.”
