Half of defined benefit (DB) pension scheme trustees say they have a clear endgame strategy in place, Standard Life has found.

The firm, which is part of Phoenix Group, surveyed 50 DB pension scheme trustees of schemes larger than £100m, exploring their concerns and considerations around their approach to de-risking.

Just under half (48%) said they do not have a clear endgame strategy in place.

Of the 50 trustees surveyed, two in five (40%) said they see market volatility as a key barrier that may hinder their ability to pursue their plans to fully secure member benefits.

Managing director of DB solutions and reinsurance at Standard Life, Kunal Sood, said: “While improvements to funding levels have been very much welcomed, trustees are still facing key barriers when it comes to pursuing and executing their ultimate end-game strategies.

“External factors such as the potential for a fall in gilt yields, present a risk to schemes that are not well-hedged, as do challenges around any illiquid asset holdings the scheme might have. Trustees do, however, appear to be reacting to this challenge, with 40% of trustees saying the recent changes in the market environment have prompted them to reduce their scheme’s allocation to illiquid assets as a priority."

Other barriers highlighted by those surveyed include issues with investment strategy (36%), lack of sponsor engagement (32%) and the new DB funding code (26%).

Some trustees also pointed towards general preparedness a potential buy-in or buy-out (26%) as a barrier, with others citing the ability to attract insurer interest (20%) and issues with data (18%).

Sood added: “Among other key barriers cited by trustees includes the Pension Regulator and Department for Work and Pensions’ new DB funding code, which outlines how pension schemes should de-risk and allocate investments towards low-dependency funding by the time of ‘significant maturity’, for a quarter (26%) of trustees.

“Bulk purchase annuities are widely considered to be the gold standard when it comes to de-risking, and our research reveals that four-fifths of pension scheme trustees do expect to approach an insurer about a buy-in or buy-out in the next five years. With no signs of the market slowing down, schemes should remain focused on preparation and solid data, which continue to play a vital role in ensuring a smooth and efficient de-risking journey.”

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