Funding levels improve over November as new innovative deal expands portfolio of endgame options available for pension schemes - LCP

Latest results by LCP’s Pensions Explorer at 30 November 2024 show that the combined IAS19 pensions surplus for the UK pension schemes of FTSE100 companies has increased over the month to over £65bn.

In November, M&G launched its “Value Share Bulk Purchase Annuity” proposal with the announcement of its first deal. The transaction, which is in the region of £500m, provides the pension scheme with a buy-in. However, it also enables the pension scheme sponsor to participate in future financial risks and rewards through a captive reinsurer. The use of a captive can provide a useful balance to cater for the different views and objectives of various scheme stakeholders. With the deal being in the region of £500m, it opens a new endgame option for schemes of this size.

This comes in the context of the Chancellor’s first Mansion House speech that was delivered on 14 November. It was Rachel Reeves’ predecessor who, in 2023, delivered a speech that prompted the consultation on options for DB pension schemes. The speech this year did not have the same impact on private DB schemes (focussing instead on significant changes to DC and the LGPS), and we await further direction on DB over 2025 – including a response to the consultation - as part of the second stage of their pensions review.

Jonathan Griffith, Partner and Head of Endgame Innovation at LCP, commented: “As we approach another year-end of strong funding positions, it’s great to see new innovations coming to the market to support schemes in their chosen endgame. It is more evidence of schemes of all sizes wanting to consider all options and potentially do something different with their strategy.”

Aaron Chaderton, Consultant, and part of the Endgame team at LCP, added: “Despite the lack of emphasis on the DB schemes in the Chancellor’s speech, the ‘real-world’ progression of all forms of endgame strategies is extremely encouraging.”