Plug the words ‘defined benefit end game’ into Google and you’ll be faced with a multitude of results featuring links to articles covering a range of topics including ‘pension solutions’, ‘DB consolidation’, ‘Pensions Superfunds’, ‘buy-out’ and ‘buy-in’.
This complex array reflects the increasing desire of trustees and corporate sponsors to explore ways of closing down the risks of DB pension schemes. Drivers include increasing regulatory pressure, for example with The Pensions Regulator’s proposed new approach to scheme funding. Financial markets are also challenging, with low interest rates and high levels of volatility sparked by the COVID-19 pandemic. In the very short term, funding levels have deteriorated and the ‘end game’ may have been pushed off, but the market turmoil will underline the need for scheme sponsors to find a sustainable solution.