Why not secure more benefits for your members? The trustee perspective on DB pensions

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19 April 2024 Solutions

Pension schemes have been ‘running on’ since they were first established, and so a decision to run on is not a decision for change – it is simply the status quo. The questions that stakeholders should be asking therefore are: “Is there a better alternative to justify a change to the status quo? Why should I not run on?”

Is there a better alternative to a DB scheme running-on? In this paper, we argue that there are four key reasons to run-on.

Pension schemes have significant assets. When considering the case for buy-out, trustees should determine whether the perceived increase in benefit security is adequate compensation for the value members give up.
Time is trustees' friend, as all else being equal, buy-out pricing reduces as members age. In the meantime, there is scope to grow a surplus over time.
Growing a surplus is an ever-easier investment proposition, as a scheme in surplus has a lower required return to achieve a funding improvement than a scheme in deficit.
The government is considering a range of measures to incentivise run-on through enhancements to the security offered within the pensions regime.

Click here to read the full whitepaper.

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