Partner Insight: Bridging the gap between strategy and implementation

Well-funded DB schemes have more strategic choices than ever: transfer to a superfund, an insurer buyout, or running on to generate returns and potentially build surplus.

These routes are not mutually exclusive, and their relative attractions can shift as funding, markets, covenant strength and regulation evolve. Rather than committing prematurely to one destination, trustees can be more dynamic about preserving credible options, with clear milestones and decision points over say a five-to-10-year horizon.

Optionality only matters if a scheme has the capability to act.

This requires three interconnected capabilities:

• Strategic vision: Define what the scheme is trying to achieve for members and which pathways it wants to preserve.
• Risk-aware governance: Establish clear decision rights, triggers and guardrails, supported by scenario analysis and continuous monitoring of funding, investment, liquidity and covenant risks.
• Effective execution: Put the investment and operational infrastructure in place to implement decisions efficiently when opportunities arise.

The investment strategy must support more than one outcome, balancing return generation, protection, liquidity and flexibility. For example, a scheme that prefers to run on may progressively reduce risk and increase liquidity as funding improves, while retaining cashflow generation. By monitoring buyout pricing and maintaining liability-side readiness, it can still transact if an attractive opportunity emerges.

This may require a more responsive governance model. Trustees can retain oversight of strategic decisions while delegating implementation within agreed parameters. Delegation need not be all or nothing; it should reflect the scheme's circumstances and the speed at which decisions may be needed.

Success is not about mapping every future decision. It is about being prepared to make good decisions as circumstances change. Clear objectives, realistic scenarios, continuous monitoring and effective implementation turn strategic flexibility into better long-term outcomes for members.