UK consulting firm Hymans Robertson recently surveyed 250 finance and pension decision-makers in UK companies, covering a range of topics including: respondentsu2019 strategic pension priorities over the next few years, respondentsu2019 views on defined benefit (DB) endgame strategies, the impact of the Pension Schemes Act 2021 on company planning and financial activity, respondentsu2019 views on future retirement provision and government policy, and corporate and trustee governance.
The results suggests that almost half (48%) of UK defined benefit pension schemes intend to insure their plans via a buy-out solution in the next decade. However, 45% of these schemes are concerned about a lack of insurer capacity or interest and most companies generally are unclear about how new solutions or government policy may impact the detail of their pension strategy.
u201cAlthough there is uncertainty as to what the pension landscape will look like over the next few years, there is also opportunity in relation to new solutions coming to market and evolving government policy incentivising run-off strategies.
u201cCompanies intending to pursue an irreversible insurance buy-out transaction in the short-to medium-term may wish to consider keeping their options open, given that the Mansion House reforms could open up new value creation opportunities, such as lowering the funding bar for extracting surplus or reducing the 35% tax charge on surplus refunds,u201d said Leonard Bowman, Partner & Head of Corporate DB Endgame Strategy at Hymans Robertson.
u201cThis is also a potential win-win situation for companies and members, whether by share of surplus solutions meaning augmentations to member benefits or sponsors re-visiting their future pension provision designs. Companies should be taking a step back and re-evaluating their endgame strategies, to ensure it aligns with the companyu2019s broader objectives and beliefs and also reflects the rapidly changing pension landscape.u201d