Buyout is no longer the default endgame choice as 87% of trustees consider run-on an attractive option.
Analysis from TPT Retirement Solutions has revealed that 88% of the 100 trustees it polled said they expected to decide upon an endgame strategy within the next five years, while 39% expected to do so in the next two years.
The data was published on Tuesday and indicates that trustees are considering a broad range of options for their schemes, beyond the traditional insurance buyout.
TPT found that 41% of trustees favoured consolidation into a multi-trust solution, while a similar proportion (40%) preferred consolidation into a superfund. Just over a third (36%) said they would opt for a capital-backed journey plan, while 34% were targeting a DB master trust.
Just a quarter (27%) said they were considering a bulk annuity as their preferred option.
The research also found that a large majority of trustees (87%) saw running on their scheme to generate and maintain a surplus as an attractive endgame option. The government is currently considering allowing trustees greater flexibility over how they use surpluses.
A fifth of respondents (20%) said the principal factor when considering running on was the strength of the employer covenant.
Other important considerations were the ability to make additional payments to members (17%) and providing potential repayments to employers (13%).
Nicholas Clapp, commercial director at TPT Retirement Solutions, said: “Our research shows that the majority of trustees see run-on as an attractive option and an increasing number of trustees are now considering run-on as part of their endgame strategy.
“The evolution of rules governing surplus returns are likely to see increasing focus on this, and the changes which are needed to the scheme’s operating model in order for this to work.
“In reality, every scheme is a period of ‘run-on’ until a decision is made to transfer the scheme to an insurer or superfund.”
On average, the trustees surveyed expected to continue to manage their schemes without any major changes for 3.6 years before putting in place an endgame strategy. Half (49%) expected to continue managing their schemes as they currently are for between three and five years.
Further reading
Support for government surplus access plans (11 April 2024)
Use surplus to restore inflation protection, say trustees (24 April 2024)
Charities urged to review endgame plans for DB schemes (19 March 2024)
