Trustees and sponsors must ensure their vision is aligned when pursuing the run-on of a DB scheme — according to Hymans Robertson.
It warns that without clearly defined common goals, this there is a risk of wasting management time and excessive spending on advisor costs, with both parties pulling in opposite directions.
These warnings come sit its latest update to the Excellence in Endgame insights hub.
However it says the majority of practical issues can also be resolved fairly easily if there is a common shared purpose.
It cautions that stakeholders must work together to maintain sight of their key objective if they are to make run-on work. The consultancy says that exploring the merits, through detailed and considered strategic planning, will ensure stakeholders are working together.
For most DB schemes, the discussion at this stage will centre one of four options
- a realisation that more thought is required
- a preference for risk transfer
- deferring decision-making
- agreement that run-on is the most appropriate solution
Hymans says that considering various options together will ensure that future challenges are manageable, and all of those involved fully understand the path ahead.
Commenting on why DB sponsors and trustees should unite to explore the feasibility of run-on before diving into the granular detail, Hymans Robertson head of corporate consulting Leonard Bowman says: “Run-on can be a very powerful and attractive option, for all stakeholders. However, it can also open up a daunting number of issues and decisions to consider.
“It’s very easy to lose sight and end up not being able to see the wood for the trees. It is tempting to dive straight into detailed analysis, but that could lead to wasted time and money.
“The starting point is to get the company and the trustees around a table to discuss all of the options. This will ensure that the respective benefits and challenges are heard and explored, and a common end-goal is reached.
“When getting round the table, it is important that any past positions and comments are parked and previous assumptions are put to one side. Whilst detailed analysis is not needed at this principles based stage, it is worth checking that all options under consideration are allowed legally. Although an unresolvable legal issue is rare, seeking legal advice early will avoid future wasted time or spend.
“By having this initial, principles based discussion, this ensures all stakeholders see value in taking the next steps, getting advice and taking time to make decisions. They will then be fully aware of what work needs to be done to meet the needs of scheme members, the trustees and the sponsor.”