04/16/2024 | Press release | Distributed by Public on 04/16/2024 02:31
XPS Pensions Group Survey reveals 75% of trustees willing to govern schemes that run on for surplus
16 Apr 2024
75% of DB pension scheme trustees are willing to govern schemes that run on for surplus, a survey from XPS Pensions Group has found.
As part of its response to the Government's consultation on options for DB pension schemes, XPS has carried out a survey of 150 trustees and sponsors representing over 300 pension schemes with assets estimated at £420 billion. This sought the industry's views on Government proposals to legislate to incentivise DB schemes to run on for surplus.
The survey highlights a clear willingness of trustees and sponsors to run schemes on collaboratively, but only where strong protections are in place to protect funding levels and members.
Support for running on
Key insights from the survey are:
Wayne Segers, Partner at XPS said, "The survey reflects what we are now seeing in the industry. Trustees and employers are standing back and together objectively exploring what the right future strategy is for their DB scheme and members. While most trustees and sponsors are open to exploring the option of running on, that has to be where it is right for their members and where the downside risks to the sponsor can be safely managed and are proportionate to any upside. We still see the majority of schemes decide insurance is the right destination, but more and more are choosing to run on."
Defining and managing surplus
The desire to balance managing risks against the potential value to members and sponsors is clearly shown in views from the survey on how to determine surplus and reduce risk:
The different views above are reflected in views on the most important protections to put in place when running on for surplus:
Wayne Segers added "There is a clear steer that sponsors support being able to extract surplus below buyout but critically would want to adopt a low-risk investment strategy to manage the risk of deficits emerging. This reflects our view that when running a scheme on it is important to ensure a stable predictable flow of surplus. This allows a degree of certainty of being able to improve member benefits and deliver some value to the sponsor."
We also explored views on how surplus should be used
Desired changes to regulations
The survey also dug into what regulatory changes sponsors and trustees would wish to see:
Wayne added, "in our first research paper last year on future DB strategy we set out a proposed way that schemes could safely run on for surplus. A cornerstone of this was providing trustees with a blueprint to support them through either a code of practice or regulatory guidance. We are encouraged that the Government has taken forward this idea in their proposals and that the idea is supported by a significant number of trustees."
Notes on the survey
The XPS surplus survey gathered views on trustees and sponsors on the Government's proposals for facilitating surplus extraction sent out in its consultation on Options for Defined Benefit pension schemes. We had 150 responses to the survey representing over 300 pension schemes with assets totalling an estimated £420 billion. We will be sharing the full results of our survey as part of our response to the Department for Work and Pensions consultation on Options for Defined Benefit schemes that closes on 19 April 2024.