Over 43 per can of UK pension schemes are now targeting an insurance buy-out as their endgame solution, up from 35 per cent a year ago, according to a survey by Janus Henderson and mallowstreet.
More than half, or 56 per cent, of smaller projects with a budget under £1bn aim for a buy-out. Buy-outs are becoming more common, especially among plans with weaker sponsors, despite the fact that the new pensions DB funding rule will make low-dependency strategies the default long-term funding goal for DB schemes.
The report also revealed that 2 out of 3 UK DC schemes list boosting member involvement as one of their top difficulties, and 82 per cent of UK trustees find the rising regulatory complexity of pensions challenging.
Janus Henderson head of UK institutional Anil Shenoy says: “The insurance buyout is becoming more popular as an endgame strategy and this trend is likely to continue following the improvement seen in many schemes’ funding positions over recent months. However, the repricing of liquid corporate bond markets means more opportunities to construct a low-dependency portfolio which can be useful if schemes need time to get “buyout ready” or if there are capacity constraints in the insurance market.
“Together with the expert team at Mallowstreet we designed this survey to hear the trustees’ voice and understand their views in several critical areas. The results demonstrate the pension industry is experiencing significant change across both the DB and DC landscape with trustees needing to deal with numerous challenging issues.
“At Janus Henderson we are working with our clients and their advisors to support them in several areas identified in the survey, including the implementation of ESG in investment strategies and designing corporate bond portfolios to help pay pensions to beneficiaries.”
mallowstreet CEO Stuart Breyer says: “The increase in regulatory complexity in the UK pensions industry comes at a time of greater economic uncertainty. Having access to timely and relevant information is business critical for both trustees and asset managers.
“mallowstreet’s mission is to empower better decisions, so we will continue providing institutional investors with the actionable insight they need to collaborate and stay one step ahead.”
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