Pension Endgame Solutions

UK defined benefit (DB) pension schemes are increasingly focused on their endgame planning, with the options for most being an insurance transaction or run-on.

Many schemes are looking to insure and buyout in the near term as a way to settle the liabilities of the scheme once and for all. At the same time, the UK Government has been progressing a series of changes to the pension regime that aim to make it more attractive for schemes to invest for a surplus over the long-term. By doing so, they are creating a new and expanded opportunity set for pension scheme run-on strategies.

The question for trustees and sponsors now is whether you look to secure your scheme’s liabilities with an insurer or consolidator, or should you continue to run-on for the foreseeable future?

Choosing the best strategy can prove challenging but we are here to help

Pension Scheme Risk Settlement

Risk settlement involves transferring the responsibility for future pension payments from a pension scheme to a specialist insurer or consolidator, typically appealing to trustees and sponsors who wish to offload financial, demographic, and governance risks.

Pension Scheme Run-on

Run-on describes an endgame strategy for a pension scheme that does not involve immediate settlement with an insurer or consolidator but instead continuing to operate the scheme and pay out benefits from scheme assets. At the extreme, a scheme could continue to do this until the last pension instalment is paid to the last surviving beneficiary, years into the future. However, for many, run on is a bridging strategy which might be expected to be in place for a few years, or even decades, after which the scheme intends to settle the liabilities and wind up. 

Pension Scheme Captive

In between, pension scheme risk settlement and run-on there is an option for captive solutions which have characteristics of both of those groups.  Here benefits are insured with a UK fronting insurer who in turn reinsures the benefits with the sponsor’s own captive insurance company and is run-on via the captive.