Almost half (48 per cent) of member-nominated trustees (MNTs) are currently planning for buyout as their endgame objective, research from the Association of Member Nominated Trustees (AMNT), in conjunction with Schroders, has found.

Despite this, MNTs identified several hurdles of moving towards buyout, with 26 per cent suggesting insurer capacity was a major hurdle to achieving buyout for their scheme.

Meanwhile, 22 per cent said current pricing, and 21 per cent said the sponsoring employer had differing views.

In addition to this, the survey revealed that over one third (40 per cent) saw run on as a viable option for their scheme, showing trustee’s confidence in the sustainability of continuing operations and meeting obligations without seeking a buyout.

Furthermore, 37 per cent of respondents said they currently plan for self-sufficiency as their scheme’s endgame.

In addition to this, 48 per cent of respondents said they were open to targeting lower return objectives for longer to achieve their endgame, with lower leverage on liability-driven investment (LDI).

The research also revealed that 36 per cent of trustees are considering changing their investment strategy, with reasons for the shift including de-risking and maintaining lesser amounts of equities, a focus on LDI strategies, changes in fiduciary managers, buyout preparations, and pursuit of specific investment return targets.

However, 41 per cent of trustees disagreed with the need for change in their investment strategy even after the gilt crisis, suggesting a “strong” belief in the resilience of their current governance structures.

More broadly, the research found that nearly 1 in 5 (19 per cent) respondents do not feel comfortable about the impact of any future cyber event, reflecting ongoing concerns about cybersecurity risks.

However, the survey also revealed that 45 per cent of those polled have developed governance software with future upgrades planned, indicating a proactive stance towards enhancing governance capabilities.

When asked about their concerns about rising interest rates for defined contribution (DC) and additional voluntary contribution (AVC) schemes, 25 per cent of respondents expressed concern that advisors should have moved more quickly to adjust DC and AVC funds considering interest rate rises.

AMNT said this highlighted the importance of timely and informed advice in navigating changing market conditions.

Commenting on the research, AMNT committee member, Stephen Fallowell, said: "The findings show a definite improvement in trustees’ confidence in reaching beneficial outcomes for members.

“Though buyout remains the primary end game there is a significant increase in funds moving to run-off and self-sufficiency. 

“On a less positive note, one of the most significant threats to funds was felt to be the possibility of cyber-attack with its harmful effects on the fund and its members.

“Our analysis also provides insights from trustees on their motivations, perspectives and challenges with regard to their investment and governance approaches."

Adding to this, Schroders head of UK institutional business development, Ronan O’Riordan, said traditionally, a buyout with an insurance company has been viewed as the “gold standard” for pension schemes, but argued that many schemes are now challenging whether conducting a buyout as soon as possible is the “optimal” solution for their scheme.

“As a result, alternative strategies, specifically run-off strategies, are gaining traction,” he noted.

“The evolving market and legislative landscape have led pension scheme trustees to consider alternatives to traditional buyout strategies.

“Run-on solutions, particularly those using a cashflow-driven investment strategy, are emerging as viable alternatives, offering control, flexibility, and certainty of outcomes.”

---