On the go: Two-thirds of pension trustees are considering other options besides buyouts as part of their schemes’ long-term funding goals, new research has revealed.
The annual UK Fiduciary Management Survey, which is produced by the Pensions Management Institute and Schroders Solutions, found that more than three-quarters of the 107 trustees polled are rethinking their funding journeys, given the rebound in scheme funding since the lows of March 2020 when the coronavirus outbreak disturbed funding levels.
Trustees’ willingness to look beyond buyouts comes despite the rising affordability of such transactions and a record year for the market, the research revealed.
Defined benefit schemes’ funding levels hit a new record at the end of last year, according to Legal & General Investment Management.
At the time, the average DB scheme could expect to fund 98.4 per cent of accrued pension benefits as of December 31 2021. This was up from 98.3 per cent at the end of September last year and 91.4 per cent in March 2020.
According to the PMI and Schroders research, 56 per cent of respondents now favour using illiquid assets as they approach their endgame, with trustees increasingly opting for assets that offer a smoother funding journey and that help schemes to achieve rising cash flow demands.
The survey also reinforces the increasing stature of environmental, social and governance consideration being taken by trustees, with just under half of respondents taking the view that their schemes should divest from managers with low ESG scores. Just over a quarter of respondents opposed divestment on these grounds.
“Many trustees can now rethink their journey plans after a bumper year in investment performance and scheme funding,” said Gareth Tancred, chief executive at the PMI.
“While some will be looking to secure buyouts in the coming months, other trustees are looking at self-sufficiency as a long-term goal.”
