Nearly a third (31 per cent) of defined benefit (DB) pension schemes have already reached endgame, according to research from Aon.

Its findings showed that around one in seven (14 per cent) expected to reach endgame in the next one to two years, while 24 per cent believed they would hit endgame in three to five years.

Almost a quarter (22 per cent) expected to be in endgame within five to 10 years, and 9 per cent predicted it would take more than 10 years.

Buyout remained the most popular endgame target amongst DB schemes, with 62 per cent preferring this option once it was affordable, while 12 per cent were targeting run-on beyond buyout, then buyout when settlement is ready.

Around one in seven (15 per cent) planned to run-on beyond buyout, and 11 per cent were undecided.

The research was presented to the PLSA Annual Conference 2024, with both panelists, Aon investment partner, Lucy Barron, and Boots Pension Scheme chair of trustees, Alan Baker, noting the recent improvement in funding levels of DB schemes.

However, Barron highlighted that there had been “quite a dispersion” in terms of outcomes.

“There’s certainly been some winners and, if not losers, some who have not done quite so well,” Baker added.

“It’s clearly very much linked to the investment strategy that schemes were adopting and what hedging they had.”

Commenting on the findings of the research, Barron stated: “Those rising gilt yields hedging has pushed a lot of schemes much closer to the endgame target quicker than expected.

“We’re seeing a different position where schemes are no longer thinking about how they get to their endgame, they’re already there and wondering what to do next.

“Lots of schemes are well funded and thinking about how to protect that well-funded position.

“It could be doing a buyout to get that protection. It could also be to running on the scheme, looking to build up buffers, and not necessarily racing to a specific endgame target.

“With that in mind, we think the approach to setting investment strategy needs to change. We think that schemes, as a starting point, need to think about where they are now, and where they want to go next.”

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