Barnett Waddingham took a deep dive into the concerns and challenges pension schemes are facing today and what the future holds at its Annual Pensions Conference.
BW polled the attendees of its latest conference to understand the current state of pension schemes’ strategies, their plans for the future and the potential initiatives to increase diversity of trustee boards.
Although almost a quarter, 23.9%, were unsure of their endgame strategy, 24.6% of respondents are looking at buyout, and 26.8% are aiming for self-sufficiency. At the current time, superfunds appeared to be the least favourable endgame strategy with only 1.4% looking at this option.
The two biggest worries for most schemes in a world beyond Covid-19 were the burden of legislation or governance, 36%, and funding and investment risk, 30.9%. The third most apparent worry was covenant in the long-term with 23.5%, however, covenant in the short term was a vast difference with only 5.1% of respondents stating it was a worry.
"Prior preparation and planning is a priority for schemes as they set and navigate their way along their long-term strategies."
Diversity and Inclusion has quickly risen up the agenda for trustee boards. More than 70% are already or would consider reviewing recruitment screening and search processes to increase diversity at board level and 60% would look to reviewing language, style and methodology used in recruitment. Interestingly only 2.4% would currently introduce recruitment quotas.
Paul Houghton, Partner and Head of Actuarial Consulting, said; “It is no surprise that the global pandemic has raised large uncertainties across the market, but despite this dramatic backdrop schemes see the burden of ever increasing regulation as their biggest concern. It does beg the question as to whether this concern is driving trustees to distraction as many trustees are still unsure on their endgame strategy, still investigating their longevity reach and don’t know how to mitigate the risk of distress.
“Prior preparation and planning is a priority for schemes as they set and navigate their way along their long-term strategies, whether that is targeting a future buyout transaction or carrying on in a self-sufficient environment. Without thorough understanding or a well-thought-out strategy schemes could fall short of their desired outcome.”
- The majority of respondents, 66%, believe they will reach their endgame goal in more than five years. Encouragingly only 15.6% were still unsure how long it would be
- 29.9% of those surveyed want to investigate their schemes longevity risk further, 21.5% plan to accept the volatility and the remainder will look to hedge or remove this risk
- Nearly all, 84%, of those surveyed believed their employer covenant is strong or not currently facing distress
- A small proportion, 16.1%, were concerned about the employer’s prospects. However, only 5.1% but were already taking action to prepare for distress
BW polled its attendees, who were mainly trustees throughout its Annual DB Pensions Conference.
For trustees and companies mapping the course of their DB pension schemes, Barnett Waddingham has launched a DB Navigator to offer a clear and simple decision-making framework to support on the journey.
Packed with case studies to help you navigate each confluence, takeaways to steer you on the right course and videos to guide your DB pension scheme strategically through the choppy waters of endgame planning.Interactive report