Defined benefit (DB) pension scheme trustees approaching bulk purchase annuity (BPA) transactions should carefully consider the risks of defaulting to incumbent advisers, Cartwright Pension Trusts has warned.

With more DB schemes moving closer to their endgame and competition in the risk transfer market rising, schemes were facing risks by prioritising price alone or defaulting to an incumbent adviser out of convenience.

These approaches to buy-in and buyout risked overlooking specialist expertise or alternative approaches that could provide stronger outcomes for the scheme and its members, Cartwright stated.

Cartwright Pension Trusts head of pensions investment, Yona Chesner, noted that buy-in and buyout transactions were among the most significant financial decisions trustees will make.

However, while the firm was often seeing schemes undertaking detailed analysis when choosing an insurer, the same level of scrutiny was not always applied to the advisers supporting the transaction.

“Trustees often recognise that alternative advisers may offer different perspectives, specialist expertise or potentially more competitive pricing, but still choose to remain with the incumbent adviser,” Chesner continued.

“That instinct is completely understandable, incumbents already know the scheme, the data and the history. Continuity can feel like the safer option during a complex transaction.

“However, taking the time to test the market allows for a thorough assessment of all available approaches, helping to achieve the best possible outcomes.”

Chesner highlighted that reviewing an incumbent adviser did not necessarily mean launching a full adviser search.

“Practical steps such as requesting a short capabilities presentation from alternative advisers, asking incumbents to outline how they differentiate themselves, or seeking informal market feedback can provide helpful perspective without slowing the process down,” he concluded.

---