Common vision ‘vital’ for DB scheme sponsors and trustees in run-on planning

It is vital that defined benefit (DB) pension scheme sponsors and trustees share a common vision when considering run-on as an endgame option, Hymans Robertson has argued.

The consultancy warned that, without this consensus, there was a risk of wasting management time and excessive spending on adviser costs as both parties could be pulling in opposite directions for their preferred end goals.

Furthermore, Hymans Robertson argued that the majority of practical issues were easier to solve if there is a common vision between sponsors and trustees.

Working together to keep sight of stakeholders’ key objective of making run-on work was imperative, and exploring the merits through detailed and considered strategic planning will help ensure this, the firm noted.

Additionally, it argued that this will help assess all the endgame options available to DB schemes, ensuring that future challenges were manageable and helping all parties involved to fully understand the path ahead.

Commenting on why DB scheme sponsors and trustees should have a shared understanding to explore whether run-on was feasible for their scheme, Hymans Robertson head of corporate consulting, Leonard Bowman, said: “Run-on can be a very powerful and attractive option, for all stakeholders.

“However, it can also open up a daunting number of issues and decisions to consider. It’s very easy to lose sight and end up not being able to see the wood for the trees. It is tempting to dive straight into detailed analysis, but that could lead to wasted time and money.

“Ultimately, it is key that all stakeholders work together to keep the big picture in mind and see value in the feasibility of run-on. There must be a common vision that run-on is worth deeper investigation.”

Bowman stated that the starting point was to get the company and trustees around a table to discuss all the options, which would help ensure that the respective benefits and challenges are heard and explored, and a common end goal is reached.

“When getting round the table, it is important that any past positions and comments are parked and previous assumptions are put to one side,” he continued.

“Start with a genuine blank sheet of paper and open mind. Whilst detailed analysis is not needed at this principles-based stage, it is worth checking that all options under consideration are allowed legally. Although an unresolvable legal issue is rare, seeking legal advice early will avoid future wasted time or spend.

“By having this initial, principles-based discussion, it ensures that all stakeholders see value in taking the next steps, getting advice and taking time to make decisions. They will then be fully aware of what work needs to be done to meet the needs of scheme members, the trustees and the sponsor.”

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