12% of corporates have endgame strategy in place

Almost nine in 10 (87.8 per cent) defined benefit (DB) schemes do not have a fully planned end game strategy with clear timeframes in place, research from Hymans Robertson has revealed, prompting concerns that schemes could be “sleep walking into a de facto buyout”.

The research, which was conducted in the form of a poll at a webinar hosted by Hymans Robertson, also found further indication for the need for better endgame understanding as 56.7 per cent of those surveyed would buyout now if they could.

The reason for this “sleep walking” was attributed, by Hymans Robertson head of corporate DB endgame strategy, Leonard Bowman, to the variety of different options available to schemes.

Bowman also stated that as funding improves for many schemes there is increased urgency on companies to work out their preferred endgame strategy and to engage with their trustees.

“Many have avoided addressing this issue, due to the perception that any change in decisions would lead to an investment and funding strategy involving higher company contributions,” he explained.

“They are also likely to be wary of taking the risk of becoming “locked in” to a strategy that might not make sense in the future if circumstances change.

“Whether or not a whole scheme buy-in or buyout is the way to go, should always be a conscious decision, given the scale of the financial implications.”

Bowman additionally stated that the webinar findings highlighted the confusion in this space and pointed to Hymans Robertson’s recently released guide as a way to give companies a “better understanding” of the issues to help with decision making, and in particular to establish whether a buyout should take place as soon as it can or instead schemes should look towards a longer-term run-off strategy.

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