UK trustees should re-think their journey planning as they approach their endgame, according to the Pensions Management Institute (PMI).
According to a recent survey PMI conducted with Schroders Solutions – the annual UK Fiduciary Management Survey* – three-quarters of trustees (76%) surveyed believe it is necessary to revisit their journey planning.
Many pension schemes are close to their endgame as scheme funding has significantly improved since the lows of March 2020, buoyed by strong growth markets and falls in liability values.
The PPF 7800 Index, for example, saw funding levels improve by 13% through this period to the end of 2021.
Gareth Tancred, chief executive officer of the PMI, said: “Our research shows that many trustees can now rethink their journey plans after a bumper year in investment performance and scheme funding.”
He noted that while some will be looking to secure buyouts in the coming months, other trustees are looking at self-sufficiency as a long-term goal.
The research also showed two-thirds of participants (66%) said they would need to consider options other than buyout as their long-term funding goal, despite buyouts becoming more affordable and expectations of a record year for transactions.
A majority of participants (70%) said they should reassess their engagement model, i.e. advisory or fiduciary management.
This is a call-to-action to investment consultants and fiduciary managers to ensure their endgame strategies, solutions, and service meet the needs of pension schemes for the final leg of their journey, the research stated.
Tancred said the research also highlighted “the growing appeal of illiquid assets to [help] trustees to smooth their funding journey”.
More than half of the participants (56%) favoured using illiquid assets as they approach their endgame. For schemes targeting low dependency, illiquid assets can form a long-term key strategic component.
Ronan O’Riordan, head of fiduciary management business development at Schroders Solutions, said: “Many of the issues we identified over the past 12 months, were again key focuses for trustees looking ahead, with sustainability, illiquid assets and long-term funding at the top of the agenda.”
* Research based on survey of 107 trustees completed in December 2021
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