Hymans Robertson has published a checklist to help defined benefit (DB) scheme sponsors plan for run-on amid growing regulatory worry.
The checklist aims to help sponsors manage this risk and make informed decisions in a complex environment.
At a recent webinar hosted by the firm, over half, 52 per cent, of attendees said regulation was the biggest risk to their run-on strategy.
Hymans Robertson advises sponsors of DB pension schemes considering a run-on strategy to assess whether it aligns with their business objectives and risk appetite. It recommends defining clear long-term goals, agreeing how and when surplus might be distributed, and aligning investment strategies with those goals. Sponsors should also manage longevity risk with appropriate buffers, stay current with regulatory changes, review governance arrangements, and understand the accounting implications early on.
Hymans Robertson head of corporate DB Sachin Patel says: “It’s crucial that sponsors of DB schemes take a logical and thorough approach to planning their run-on journey. Of course, the first step in the process is to establish whether run-on is right option for their scheme. If it is, corporates should take time to carefully consider the entire process holistically, and our checklist is a powerful starting point for this process.
“As highlighted in our recent webinar – where over half (52%) of attendees said they saw regulation as the biggest risk to their run-on strategy – regulation is an area that sponsors should constantly assess. Staying ahead of the curve in this area is a crucial method in reducing the risk of any run-on process.
“One area that’s seen significant regulatory development is around DB surplus extraction. The government’s direction of travel here is clear. It intends to harness a once-in-a-generation opportunity for sponsors and members to benefit from stronger funding levels. As these changes continue to emerge, high-quality advice will play a crucial role in helping corporates navigate complexity with preparation, clarity and confidence.
“It’s also reassuring to see policymakers listening and acting, with an increasing focus on striking the right balance between oversight and flexibility to deliver the best outcomes for members, corporates and the broader economy. The government’s announcement around the Court of Appeal judgment in Virgin Media Limited v NTL Pension Trustees Limited is another illustration of the positive step policymakers are taking.
“As the old adage goes, failing to prepare is preparing to fail – and this is especially true for schemes looking to run-on. Our checklist provides a useful roadmap for corporates to ensure they are as prepared as possible for this journey.”