Funding levels improve over October as endgame strategy decisions continue

New results by LCP’s Pensions Explorer at 31st October 2024 show that the combined IAS19 pensions surplus for the UK pension schemes of FTSE100 companies has increased over the month to around £65bn.

This strong funding position, coupled with wider market headwinds, continues to influence endgame decisions as trustees and sponsors mull over when to proceed with an insurance transaction. Following the increase in company employment costs announced in the Budget, pension scheme sponsors may start exploring all options for cost control, reviewing pensions spend, and considering ways to use the scheme to deliver cashflow benefits for both them and pension scheme members.

Over October, LCP’s latest Pension risk transfer report 2024 highlighted this developing mindset of schemes considering their endgames. Whilst the public debate often focuses on run-on vs buy-out, our experience is that endgame strategy is more about the journey to the endgame and not just a binary choice at a point in time.  Decisions and strategies are now flexible and based on an evolving balance of attitudes to risk against the potential positive upsides, with further actions based on changes in the economy, covenant, funding position, and market views.  

Jonathan Griffith, Partner and Head of Endgame Innovation at LCP, commented:

Endgame planning is not a rigid once and done. As circumstances have changed and funding positions improved, we have seen schemes adapt and take a more nimble approach to their endgame. Whilst the insurance market remains busy, this shift in approach and mindset has led to a number of schemes implementing robust strategies delivering real value.

Aaron Chaderton, Consultant, and part of the Endgame team at LCP, added:

Seeing the first wave of schemes in the current environment implementing run-on and gaining actual value shows that the vast amount of discussion on alternative endgames can be realised in practice. It’s really exciting to see how similar flexible run-on frameworks can used for other schemes, corporates and members.