The most important outcomes of a pension buyout are felt long after the transaction has left the headlines.
For members, buyout marks the beginning of a relationship with the insurer responsible for paying their pension. For trustees choosing between providers, post-transaction delivery is therefore part of the outcome they are securing, not an additional service consideration.
Historically, the central question for many schemes was whether buyout was achievable at all. Improved funding levels, increased insurer capacity and a wider range of endgame options mean more schemes now have greater choice over how they reach their endgame.
Some will move directly to buyout. Others will use phased buy-ins or choose to run on for longer. The question is no longer simply whether a scheme can reach its endgame, but which route and provider best align with its long-term objectives.
Within buyout, price, financial strength and execution certainty remain fundamental. We believe member experience is not an alternative to those considerations. It must form part of the overall outcome trustees are securing and needs to be equally weighted.
As insurers demonstrate strength across the financial and transactional fundamentals, trustees have greater scope differentiate between providers by examining how members will experience the arrangement over the decades that follow.
Research from LCP suggests trustee thinking is already moving in this direction. It found that, if pricing were equal, more than a third (36 per cent) of respondents would choose between providers based on member experience. Objective measures such as payment accuracy, complaint handling, onboarding effectiveness and customer service performance can provide useful evidence of how obligations will be delivered in practice following a transaction.
Currently, trustees and advisers are able to assess pricing, contractual terms, capital strength and execution capability relatively easily. Post-transaction delivery can be harder to compare, even though it directly shapes members’ experience.
For members, this means pensions being paid accurately and on time, questions being answered promptly, communications that are clear and accessible, and confidence in the organisation looking after them.
When I speak to trustees and show them around L&G’s end to end in house customer administration, the conversation increasingly extends beyond the transaction itself. Questions about administration, communications and long-term service are becoming more prominent. Trustees want confidence not only that the deal can be completed successfully, but practical evidence of how members will be supported for years to come. That evidence can be found in the ways insurers set up and run administration, data, technology, operational resilience and accountability. Members may not see those processes, but they experience the results.
Every scheme has its own history, benefit structure, member population and service model. The objective is to select the provider best able to meet a scheme’s long-term needs and member expectations.
As trustee choice expands, the industry has an opportunity to become clearer and more consistent in how it demonstrates long-term member outcomes. Insurers should provide clearer evidence of their service capabilities and long-term performance, and advisers should focus on helping schemes translate member priorities into meaningful selection criteria.
This is also important for the sustainable growth of the pension risk transfer market. Capacity depends on more than insurer balance sheets and the ability to execute transactions. It also requires the operational capability to support a growing population of members over the long term.
Ultimately, a successful transaction must be completed securely and effectively. But its enduring success will be determined by whether the resulting arrangement serves members well for the rest of their lives.