There is a growing need for skilled practitioners to support insurers and pension schemes in managing resource and data challenges during the transition from buy-in to buy-out and wind-up, according to LCP.
According to LCP, the industry is facing a variety of difficulties as insurers attempt to form teams with the expertise needed to oversee the growing number of schemes going through buy-out and wind-up. The buyout process will differ according to the particular requirements of each plan, frequently needing customised solutions for certain problems.
LCP says early planning is key to preventing delays due to the sharp rise in buy-out activity, which doubled between 2022 and 2023 and is expected to double again by 2025.
Additionally, the shift to full buy-ins, now over 95 per cent of transactions, has added significant pressure on insurers and administrators, who are responsible for complex post-buy-in tasks like administrative handovers, data cleansing, and legal issues.
According to LCP, missing deadlines for data cleansing that have been agreed upon with insurers can cause delays in project schedules and may push schemes further back in the queue.
LCP recommends that sponsors and trustees handle buy-out and wind-up procedures cautiously, suggesting specialised support to handle particular issues and efficiently manage resource constraints.
LCP head of post-transaction services and partner Rachel Banham says: “The busyness of the market and accompanying resource constraints mean that specialist, experienced support is essential after schemes complete a full-buy-in.
“The pressures created by the sheer volumes of schemes looking to move to buy-out and wind-up are likely to become significantly more pronounced over the next few years given the rapid projected growth in insurer implementation pipelines. Trustees and sponsors should make sure their buy-out and wind up is carefully managed if they want to complete their process within their expected timescales and budgets.”
LCP senior consultant Alex Stobbart says: “We are seeing insurers and other providers building up their teams and investing in enhancing automated processes which will help to ease some of the pressures. However, the bottom line is that schemes need to be proactive to make sure the post-transaction phase runs smoothly and member service is maintained, with thorough preparation and the right support in place.”