Schemes are in danger of slipping into a de facto buy-out due to a lack of an endgame strategy, according to Hymans Robertson.
The majority of people, around 87.8 per cent, surveyed do not have a completely defined end-game strategy with clear structured timeframes in place, which results in decisions being taken virtually by default, according to the results of polling at a recent corporate webinar on how to prevent this danger.
A second survey revealed that only half of the individuals surveyed, around 56.7 per cent, would buy out today if they could.
Hymans Robertson head of corporate DB endgame strategy Leonard Bowman says: “As funding improves for many schemes there is increased urgency on companies to work out their preferred endgame strategy and to engage with their trustees. Many have avoided addressing this issue, due to the perception that any change in decisions would lead to an investment and funding strategy involving higher company contributions.
“They are also likely to be wary of taking the risk of becoming “locked in” to a strategy that might not make sense in the future if circumstances change. Whether or not a whole scheme buy-in or buy-out is the way to go, should always be a conscious decision, given the scale of the financial implications.
“The many different options could be causing confusion for corporate sponsors and, as a result, they might be unintentionally ‘sleepwalking’ down an endgame path. Many companies do not seem to realise they are heading towards a relatively short-term ‘de facto’ buy-out through a single, or series of smaller, buy-ins.
“Our webinar findings highlight the confusion in this space and our recently released guide aims to give companies a better understanding of the issues, to help with decision making, and in particular to establish whether a buy-out should take place as soon as it can or instead schemes should look towards a longer-term run-off strategy.”
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