Pension schemes have been striving to find the ideal route to endgame for decades now.
However, the pensions landscape has changed drastically over this period as well. Particularly relevant has been the rise in gilt yields that we have experienced over the past two years, which has significantly accelerated the time required to reach buyout for most schemes.
Though scheme funding positions across the UK DB pensions market have improved significantly, we expect many schemes will encounter difficulties securing benefits with an insurer due to capacity constraints.
We believe critical developments have the potential to prompt trustees and sponsors to consider alternative endgame options. For example, the completion of the first DB Superfund deal has initiated the proof of a concept that has been in development for years, unlocking an alternative path for schemes to pursue as part of their endgame journey.
The development of legislation that focuses on expanding the way scheme surpluses can be used will be enticing to both trustees and sponsors alike. Whether that is the prospect of enhancing member benefits or extracting surplus to bolster the savings pots of defined contribution (DC) members, to name only two options.
Nikesh Patel highlights the risks and opportunities for pension trustees and sponsors considering endgame solutions.
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This video has been prepared by Van Lanschot Kempen Investment Management (UK) Ltd. (‘'VLK Investment Management (UK)'') for information purposes only. The information contained in this video is of a general nature. This video should not be considered as the giving of investment advice by VLK Investment Management (UK) or any of its members, directors, officers, agents, employees or advisers. In particular, this video does not constitute an offer or invitation to enter into a transaction. Neither this video nor anything contained in this video shall form the basis of any contract or commitment whatsoever. VLK Investment Management (UK) is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 166063). No part of this video may be used without prior permission from VLK Investment Management (UK). Modelling is hypothetical and illustrative, based on several assumptions regarding financial markets and relationships between them. A model is necessarily a simplified representation of the real world, with simplifying assumptions made to be usable.
