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Do all roads still lead to buyout?

Do all roads still lead to buyout?

18 Apr 2024

Defined benefit (DB) pension schemes have never been better funded, and buying-out pension scheme liabilities is within reach for many, with record numbers of schemes completing transactions in the bulk annuity market.

However, with the government considering potential radical changes in policy, the most appropriate long-term solution for schemes may not be as clear-cut as it once was, and running on could create value and upside potential. Just because you can afford to buyout with an insurer, no longer necessarily means you should.

We set out why it is essential that all pension schemes consider whether their long-term target remains appropriate in light of potential future regulatory changes.

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Key Highlights

  • There is political ambition to boost the UK economy by creating scope for pension schemes to run on and invest their surplus for the benefit of both pension scheme members and scheme sponsors.
  • The anticipation of this potential industry revolution introduces additional factors that need to be considered by schemes that might otherwise have chosen buyout to be the obvious end game solution.
  • A buy-in or buyout transaction is generally irreversible, and whilst it will continue to be the route for many schemes, it is important to explore all options before you commit.
  • All schemes, but particularly those preparing their investment strategy to be ‘buyout ready’, should consider the implications and potential upside of the potential regulatory change.

We set out our endgame checklist, examine the drivers for change and consider why schemes might choose not to buyout and instead run-on in our Investment briefing. Download the PDF here to read more.

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