Managing regret risk: a new framework for DB surplus assessment
Improved funding levels are giving defined benefit (DB) schemes more options than they may have had in years. For trustees, this creates important opportunities — but also complex decisions. Before surplus is used, it is important to consider what protection remains, how resilient that protection is, and whether the scheme can continue to support its objectives over time.
The Standard Life Pension Risk Transfer team have developed a new Trustee Consideration Framework as a practical starting point for those early discussions. It sets out key questions to help trustee boards consider surplus through the lens of member security, scheme resilience and endgame planning.
Highlights from the framework include:
- Questions to help assess whether surplus decisions are supported by a resilient funding position
- Considerations around covenant strength, competing demands and the period over which sponsor support can be relied on
- Prompts on liabilities, member data and assumptions that could affect the remaining buffer
- Governance points covering trustee capacity, independent challenge, conflicts and monitoring
- Endgame considerations, including how the use of surplus could preserve, delay or constrain future options
Use the framework to support early trustee conversations on surplus, resilience and the path to endgame.
Coming soon: New research on DB endgame planning
The framework serves as an introduction to the key considerations ahead of our forthcoming white paper, which will bring these themes to life through sponsor research, trustee interviews and expert insight into DB endgame decision-making.