Industry Voice: Are trustees considering a strategy overhaul?

clock • 2 min read

In Barnett Waddingham’s new report, Ready or Not, trustees report widespread consideration for a strategy overhaul, despite also proclaiming confidence in their strategic direction.

Pension schemes are well known for their steady, conservative approach to change. It therefore came as something of a surprise that 88% of pension scheme trustees Barnett Waddingham interviewed for its new report, Ready or Not, have considered a new strategy in the past year.

The finding was particularly unexpected given that 92% of respondents also told us they were confident about the next stage of their scheme's development.

Unwritten rules of engagement

Most trustees report having a strong understanding of the direction their scheme strategy was heading. Yet, at the same time, more than one third (36%) have no formal or written plans in place. This figure rises to 42% among schemes with assets of under £500 million - and even among the largest schemes of more than £1 billion, a quarter (24%) do not have a written strategy.

Cause for concern

In Ready or Not, we explore in-depth what has caused trustees to consider a change of strategy.

A change in the sponsor covenant and regulatory pressures were two of the most likely causes. The key concern among half (50%) of respondents was rising scheme maturity. But with most DB schemes closed, the membership profile and how the scheme is expected to mature should be well understood.

Barnett Waddingham provides clients with a window on their scheme's advancing maturity through its Illuminate tool, and it is odd that schemes should have been caught out by maturity.  

Misplaced confidence

These issues are compounded by the 81% who said the recently announced Scheme Funding Code of Practice consultation for DB funds will change the way they manage the scheme's strategy.

The code will introduce requirements to set a long-term funding objective, but schemes should already have this in place. If such a high number of schemes need to make changes, the existing strategies may not be fit for purpose.

Have no doubts

Our Ready or Not report has, for us, confirmed that overall confidence among DB trustees is misplaced and founded more on sentiment than fact. This could result in damaging consequences for scheme governance, and trustees may want to consider a full strategic review.

If a review dispels these fears and any uncertainty, trustees, sponsor, advisers and of course, members can be certain of a brighter future.

Download our full report to see if our findings reflect your experience. Also, if you would like further insight into how your scheme measures up against others, our online benchmarking tool will give you a sense of where your scheme sits in comparison to our survey respondents. Based on a subset of our survey questions, it may challenge your thinking and highlight potential areas for you to consider further.

Download the full report Ready or Not here.

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