More than half (51 per cent) of defined benefit (DB) pension scheme trustees considering buyout are exploring in-specie transfers or secondary market sales to manage illiquid assets, research from Standard Life has found.

The provider said the findings signalled a shift in how schemes were preparing for the more complex elements of their endgame journey, and reflected growing demand for flexible, cost-effective solutions as schemes scrutinised illiquid portfolios more closely.

While in-specie transfers and secondary market sales were the leading options to improve transaction certainty and timing for trustees considering buyout, strategies such as deferred premiums (26 per cent) and sponsor-backed solutions (17 per cent) were also being assessed.

Scheme size was found to be influencing preferred solutions, with schemes under £1bn more likely to favour passing assets in-specie to insurers as part of buyout planning.

Meanwhile, schemes over £1bn were more likely to favour secondary market sales, cited by 76 per cent of larger schemes considering buyout.

Standard Life noted that regulatory requirements played an important role in determining which assets can be transferred and under what conditions, limiting the application of in-specie transfers.

Additionally, insurer appetite varied based on the nature and performance of underlying assets.

It said that, for many schemes, in-specie transfers were likely to form one part of a broader strategy, with trustees continuing to weigh liquidity, valuation certainty, and timing.

Strategic planning and robust governance were highlighted as important factors for schemes looking to transact in a timely manner, and trustees were seeking informed and early guidance on managing illiquid assets in buyout preparation.

Standard Life said that a lack of preparation and strong counsel can cause delays in transacting, with this becoming more evident amid elevated market activity and fluctuating insurer capacity.

“Managing illiquid assets remains one of the most challenging aspects of preparing for buyout, and trustees across the industry are considering a wide range of approaches to navigate this complexity,” commented Standard Life managing director of pension risk transfer & individual retirement, Claire Altman.

“While in-specie transfers and secondary market sales can play a role for some schemes, they are just part of a broader toolkit that trustees are exploring.

“The feasibility of any solution depends on a variety of factors - from insurer appetite to the characteristics of the underlying assets and the regulatory requirements that govern what can be transferred.

“This is why early engagement is so valuable, and trustees recognise the importance of understanding the full menu of options available to them, rather than relying on any single route.

“As the market continues to evolve, schemes that prepare early and take a holistic view of their illiquid assets will be best placed to secure insurer interest, maintain momentum and achieve a smooth, beneficial transition for their members.”

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