Preparedness for buy-in or buy-out remains key barrier to endgame for DB scheme trustees

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Preparedness for buy-in or buy-out remains at the forefront of defined benefit (DB) scheme trustees’ minds. More than a quarter (28%) see it as a key barrier to pursing their endgame strategy – slightly up from a year ago (26%).

These findings are from Standard Life research, which surveyed 50 trustees of DB schemes over £100 million¹.

Preparedness for a bulk annuity transaction can include various activities, such as conducting a feasibility study; updating and maintaining the quality of scheme data; engaging key stakeholders, such as the scheme’s sponsor or administrator; and ensuring benefit specifications are up to date.

It was of similar concern for schemes of different sizes. However, preparedness is now seen as much more of a barrier by trustees of schemes managing between £500 million and £999.99 million in assets (30% vs. 18% in 2023).

Trustees are seeking specialist advice to help improve their preparedness, our research found. For example, all surveyed trustees considering a buy-in or buy-out have sought advice to evaluate and improve their scheme’s data administration processes.

Most trustees (64%) found that no action was required, as their data was in good shape. However, more than one-third (36%) have undertaken or intend to undertake a data cleanse – a process that typically involves correcting errors or filling identified data gaps.

Data ready

Thorough preparation is essential for schemes looking to secure a successful BPA transaction and data quality plays a pivotal role in that process. Inadequate or inaccurate data can hinder an insurer’s ability to assess liabilities accurately or calculate buy-out pricing, creating roadblocks in the buy-in or buy-out process. Additionally, issues such as incomplete member records, historical errors, and inconsistent data formats often necessitate time-consuming and costly remediation efforts.

It’s encouraging that many trustees are seeking guidance and advice ahead of approaching an insurer. By doing so, trustees will be best placed to evaluate and enhance their data quality, minimise barriers and strengthen their position.

With evolving market conditions, prioritising preparation, particularly data readiness, ensures a smoother transition and better outcomes for members. Accurate and well-maintained data is not just a technical requirement, it’s the foundation of a successful endgame strategy.

¹ Research commissioned by Standard Life and conducted by Censuswide, with a representative sample of 50 DB pension Trustees with schemes over £100 million, between 7 October and 22 October, 2024.