The endgame for trustees and sponsors can be defined with varying degrees of complexity. The key objective of all endgame strategies, regardless of definition, is to improve the position of the member by minimising the risk of failing to deliver future benefits.
The challenge for trustees in achieving this is making decisions on complex issues. This includes acting on ever-changing investment markets, disclosures linked to the increasing burden of day-to-day governance requirements, and ensuring that the underlying data is good enough to pull the endgame trigger on the objectives you set and monitor. Doing all this for a reasonable and predictable cost is a tough job for trustees and advisers!
One of the positive things about the increasing complexity of running DB schemes is that it drives innovation, including technology improvements and new endgame solutions. We expect that this innovation, to help trustees cut through complexity, will continue as schemes further mature and get closer to their ultimate goals.
Increased trustee choice and consolidation options are obviously positive developments, but it is not a given that they are the right option for every scheme. When choosing a master trust or other consolidator there are many factors to consider, including loss of control, member experience, legal status, ease of entry/exit and flexibility of future outcomes. These are important elements when it comes to understanding and evaluating the impact on your future options.
Whatever your criteria for assessing future consolidation options for your scheme, the key factor above all else is to make sure that trustees and sponsors are happy with the flexibility to take advantage of opportunities as they arise. This flexibility will allow you to retain the choice to switch strategic direction for the benefit of members, regardless of whether the change is driven by asset valuations, legislative requirements, insurance pricing, or another event not yet known about.
Let’s face it: many DB pension schemes in 2022 may only be a blip in bond yields away from the gold standard of buyout. Maintaining flexibility and control will put you in pole position to achieve this.