No matter the chosen route when it comes to your pension scheme, the key is to remain agile - Gordon Watchorn, LCP

When it comes to company pensions, agility will be important in 2024 as recent developments, such as the Chancellor’s Mansion House speech and Autumn Statement, all point to a more positive relationship between pension schemes and a sponsor’s finances. The mood music on sponsors accessing surplus is certainly changing, with the cut on the tax rate that applied to a refund of surplus from 35% to 25% being a welcome factor for all sponsors.

According to LCP, Directors now face a prime opportunity to steer their businesses to make the most out of this position, fully considering the range of alternatives and how these could lead to better solutions for both their business and members of the pension scheme.

There are several priorities that Company Directors should have when it comes to their pensions in 2024:

• If contributions are still being made into your pension scheme, this must be reviewed immediately even if this falls outside of a funding valuation cycle. Should additional support be required to protect members’ benefits, consider alternative forms of security to cash, as these may well be more efficient.
• Ensure a thorough grasp of the funding position on all measures and understand the entire spectrum of current options available for the scheme.
• If the best outcome for the business is to get the pension scheme and associated risks off the balance sheet, there are now more options than ever, and each should be considered carefully. Whilst the insured buy-in market remains buoyant, a superfund transaction and a number of other options for external capital have broadened the landscape for pension scheme end-game options. These innovative, non-insurance solutions may be more attractive from both a cost and member outcomes perspective.
• The combination of stable high funding levels and low level of risk makes running schemes on for longer more feasible. With this, further surplus could be generated from the pension scheme and used to support the business as well as improve member outcomes.

Gordon Watchorn, Partner and Head of Corporate Consulting, LCP, commented:

“No matter the chosen route when it comes to your pension scheme, the key takeaway is to remain agile. If the last few years have taught us anything, it’s that things can change quickly, even in pensions. Staying well-informed and alive to market opportunities is essential to navigating these changes.

Looking ahead, 2024 will be a fascinating year and pivotal period for many sponsors regarding their relationship with the pension scheme, one way or another. Personally, I am very much looking forward to making sure sponsors’ objectives are at the forefront of pension schemes’ strategic journeys.”

You can read Gordon’s blog here.