Almost nine in 10 (88 per cent) defined benefit (DB) pension scheme trustees expect to decide upon an endgame strategy within the next five years, while 39 per cent expect to within the next two years, research from TPT Retirement Solutions has found.

The research revealed that 98 per cent of participants were beginning preparations for entering endgame.

It also showed a broad range of options are being considered as endgame strategies beyond the “traditional” buyout option.

The most popular options being considered were consolidation into a multi-trust solution (41 per cent), consolidation into a superfund (40 per cent), a capital-backed journey plan (36 per cent), and consolidation into a DB master trust (34 per cent).

Meanwhile, 28 per cent said they are considering run-on and 27 per cent said a bulk annuity or buyout was being considered.

The survey also found that, on average, trustees expected schemes to be managed as they currently are for 3.64 years before putting put in place an endgame strategy, while 4 per cent expected schemes to take 10 years to reach that stage.

Furthermore, almost half (49 per cent) of respondents said they expected to continue managing their schemes as they currently are for between three and five years.

Despite some schemes continuing to strive for buyout, 87 per cent of trustees considered running on as attractive as an endgame solution. 

A fifth (20 per cent) of respondents considered the strength of the sponsor’s covenant the most important factor for considering this option, while 17 per cent of respondents said the surplus share for members was the most important factor.

In addition to this, 13 per cent said being able to return a share of the surplus to employers was a top factor when considering run-on.

“Our research shows that the majority of trustees see run-on as an attractive option and an increasing number of trustees are now considering run-on as part of their endgame strategy,” TPT Retirement Solutions commercial director, Nicholas Clapp, commented.

“The evolution of rules governing surplus returns are likely to see increasing focus on this, and the changes which are needed to the scheme’s operating model in order for this to work.

“In reality, every scheme is a period of run-on until a decision is made to transfer the scheme to an insurer or superfund.

Clapp suggested that with trustees seeing “ever-increasing” costs of running the scheme, it is important when designing a run-on solution that the scheme is being run as efficiently as possible, with an appropriate investment strategy to support this.

“This is where DB Connect can offer a valuable structure for trustees by reducing the costs of running the scheme, which supports the financials needed to underpin the decision to run-on and allows the trustees to focus their time on monitoring the performance of their selected run-on solution,” he added.

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