De-risking towards endgame has increased “significantly” in importance for pension schemes over the last 12 months.

According to the latest findings from Russell Investments’ UK Defined Benefit (DB) Market Insight study, 56% of respondents identified it as an investment priority, an increase of 11% compared to Russell Investments’ first DB market study in autumn/winter 2022.

Improving or maintaining funding levels (56%) and managing market risk (53%) also remain key priorities.

An increased number of schemes also identify the importance of reducing pressure on their sponsors (30%) and addressing leverage and collateral issues (27%).

Schemes with more than £1bn (€1.16bn) of assets appear more focused on leverage and collateral (37%), as well as on increasing liquidity (31%) and improving diversification (29%) than their smaller peers.

However, the study found that despite the improved funding positions that many DB schemes now find themselves in, 35% are still undecided on their endgame objective.

For the majority who have decided on their long-term target, buyout (38%) remains the most popular option, while runoff or low dependency strategies (21%) are also being considered. Just 5% of schemes have changed this target in light of funding improvements over the past year, with much more focus on being on the timeframe to reach it.

The study found that 30% of pension schemes are working towards endgame within a shorter timeframe but there are more challenges in their ability to adjust asset allocations and access to buyout solutions.

Russell Investment surveyed 107 UK DB pension schemes between September and October 2023, with respondents representing a total of more than £250bn in assets under management. Around half of respondents were responsible for more than £1bn of assets.

Simon Partridge, head of UK fiduciary management at Russell Investments, said: “DB schemes are having to rapidly accelerate their efforts and planning as significant improvements to funding levels over the last 12 months put many much closer to endgame than they would have previously anticipated.”

He added that this does bring challenges, with “legitimate questions” being raised over the capacity of providers to satisfy the increased demand for buyout solutions.

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Pamela is IPE's UK correspondent. Before joining IPE in May 2023, she spent five years writing about the insurance industry. During her career so far she won awards for Most Promising Newcomer in 2020 and Best Investigative Article in 2022 from the British Insurance Brokers Association, and was also highly commended at the WTW Media Awards for Insurance Features Journalist of The Year.View full Profile

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