“No one size fits all” solution – as schemes of all sizes look at benefits of run-on

Latest results by LCP’s Pensions Explorer at 31st August 2024 show that the combined IAS19 pensions surplus for the UK pension schemes of FTSE100 companies stands at around £60bn – broadly unchanged from the positions at 30th June and 31st July.

The steady and robust funding position is helpful as more schemes start planning and implementing run-on strategies aimed at delivering increased value to both members and pension scheme sponsors. We are seeing schemes who are aiming to run-on for the long term, as well as those who are getting benefit from simply delaying full insurance for a shorter period.

These strategies are not solely available for large or giant schemes.  Whilst the potential financial prize may be larger for these schemes, our latest survey suggested that around a third of smaller schemes were targeting run-on or self-sufficiency as their long-term objective.

We are working with a number of these smaller schemes that are running on beyond full insurance funding. Whilst the rationale for every scheme is different, our experience has demonstrated that so long as the covenant is visible and there is sufficient upside potential, Trustees and sponsors are willing to investigate running-on.

The new government continue to be making the right noises around run-on too. Over the last month, Rachel Reeves has talked about wanting pension schemes to invest more into the UK economy, and to boost member outcomes. Pension schemes running-on can help the government’s aims in both these areas.

Jonathan Griffith, Partner and Head of Endgame Innovation at LCP, commented: “As we have yet another month of strong funding levels, we see the confidence of sponsors and trustees of all schemes, irrespective of size, grow. Run-on strategies can deliver significant benefits to both members and to sponsors, and we are helping schemes develop robust strategies where this financial upside can be shared.”

Aaron Chaderton, Consultant, and part of the Endgame team at LCP, added: “Continued healthy funding levels, and continued rhetoric on UK growth from the government, gives schemes of all sizes great encouragement to consider run-on seriously.”