The Independent Governance Group (IGG) has created a dedicated ‘Strategic Pension Solutions’ offering to support schemes that are navigating the rising complexities associated with surplus distribution, utilisation and other endgame strategies.
The move comes after research completed to support the launch of the new group revealed almost one in three (32%) IGG schemes are targeting low dependency or bulk purchase annuity as part of their derisking strategy, and almost three in four (72%) have called for a statutory override to allow ongoing surplus distribution.
In addition, analysis from The Pensions Regulator (TPR) identified 3,750 of 5,000 defined benefit (DB) schemes as being in surplus on a low dependency basis, with a further 950 approaching the same level of funding.
Strategic Pension Solutions is the newest addition to IGG’s established Centres of Excellence, which were first created following the group’s formation in February 2023. The Centre will set out a clear path for each pension scheme’s future, covering all variables in developing a robust strategy that meets the scheme’s objectives.
The new Centre of Excellence will be led by David Farmer, IGG’s head of strategic pension solutions.
Farmer pointed out that with an increasing number of DB schemes being well-funded or even overfunded, many sponsors and trustees are exploring alternatives to traditional buyouts and buy-ins with insurers.
He said: “IGG’s new Centre of Excellence is designed for those schemes where a buyout or buy-in may not be the optimal solution, necessitating a thorough evaluation of all viable options.”
He added that IGG’s research indicates that despite a robust pensions market, a cautious approach to surplus management remains prevalent. He said that trustee directors prioritise maintaining a funding safety margin, adopting a low-risk investment strategy, and ensuring a strong employer covenant.
Andrew Bradshaw, IGG’s chief executive officer, added that the launch of the Strategic Pension Solutions unit shows IGG’s “ability to respond directly to the changing nature of the UK pensions industry and demonstrates our capacity to quickly identify and meet shifts in sector demand”.
He noted that schemes in surplus have in excess of £225bn in aggregate surplus assets, representing roughly 17% of total DB assets.
“It is never a case of ‘one-size-fits-all’ when it comes to scheme management, and our new Centre of Excellence will support in the decision-making process where factors at play continue to evolve,” he said.
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