The pensions de-risking market continues to mature, with an increasing focus on greater efficiency – both at the initial buy-in transaction stage, and later data cleanse and wind-up. This can only be good, as it will ultimately mean higher deal volumes, and hence more members benefiting from the protection afforded by the insurance regime (where sponsors and trustees consider this appropriate).

This theme of efficiency was a focus of discussion at the recent Endgame Perspectives Group meeting, which we at Sackers were delighted to host. The Group is fast developing as an important voice on de-risking and other endgame solutions and strategies for pension schemes. It’s quite unique in the industry, as it brings together providers, consultants, administrators and legal advisers.

The “holy grail” of efficiency would be to standardise buy-in transaction documentation, including policy terms and (a particular bug bear of lawyers) benefit specifications. Maybe we’ll get there one day. But there are challenges for both trustee advisers and insurers in agreeing specifications in the right format, and with the necessary clarity, so that insurers don’t feel the need to “replay” the specifications presented to them.

Even if full buy-in standardisation will take a while to achieve, smaller steps could be taken towards efficiency. Potential examples include standardised Requests for Quotations, Requested Contractual Terms, price locks, facilities to enable use of tax free cash from DC assets, and responses to common questions e.g. on ESG, cyber security and administration (with the ability to flex on each of these as required by the specifics of the transaction).

In the same vein, there is scope for greater standardisation following buy-in, e.g. for benefit adjustment following data cleanse, GMP equalisation, buy-out and wind-up (potentially including, if relevant, any augmentation as a result of surplus distribution).

We should expect more developments on this subject, making the pre and post buy-in processes smoother and more standardised, and thereby opening them up to more schemes (including smaller schemes with less bandwidth), and increasing volumes.

In the meantime, the market is still busy. Demand continues to outstrip supply and human capacity remains a real constraining factor, especially on the administration side. Our advice bears repeating that schemes contemplating de-risking will be more attractive to potential insurers if their data quality is high and benefit administration is consistent with scheme rules. Typical issues that crop up on the latter are:

• Sex equalisation – is the Barber window period correct?
• DC benefits with DB underpins – are these being administered correctly, and how will they be addressed at buy-out?
• Cohorts – are the right benefits being paid for each cohort of members, according to when they left pensionable service and their membership of any predecessor schemes?
• Increases on pensions in payment, and deferred revaluation – are these compliant with scheme rules and statutory requirements?
• Transferred in benefits – are the benefits being paid consistent with the basis provided for at the time of transfer?  Is the evidence available to check this?

As schemes plan their endgame journeys, at Sackers we are helping trustee, sponsor and insurer clients adapt to this changing landscape, and find the best solutions for members.