Preparedness for buy-in or buy-out remains at the forefront of Defined Benefit (DB) Scheme Trustees’ minds, with over a quarter (28%) citing it as a key barrier to pursing their endgame strategy1, according to new research from Standard Life, part of Phoenix Group – increasing from 26% a year ago2.
Preparedness for a bulk annuity transaction refers to the process of ensuring that a scheme is ready to transact ahead of approaching the market for a quotation. It can include wide-ranging activities, such as conducting a feasibility study, updating and maintaining the quality of scheme data, engaging key stakeholders such as the scheme’s sponsor or administrator and ensuring benefit specifications are up to date.
The research, which surveyed 50 trustees of Defined Benefit Schemes over £100m, found that results were broadly consistent for schemes of different sizes. This barrier was cited by nearly one-third (30%) of trustees of larger schemes managing between £500m - £999.99m in assets, a significant increase on the 18% of trustees of larger schemes who cited this a year ago. This is compared to 27% for trustees of mid-sized schemes with between £250m - £499.99m in assets, and 29% for trustees of smaller schemes with between £100m - £249.99m in assets.
Despite the preparedness challenge, the findings also show that trustees are responding by seeking specialist advice to help overcome the preparation barrier. 100% of trustees considering a buy-in or buy-out have sought advice to evaluate and improve their scheme’s data administration processes, for example. While the majority (64%) found that no action was required as their data was in good shape, over one-third (36%) have undertaken or intend to undertake a data cleanse - a process which typically involves correcting errors or filling identified data gaps.
Kunal Sood, Managing Director of Defined Benefit Solutions at Standard Life, said: “Thorough preparation is essential for schemes looking to secure a successful BPA transaction and data quality plays a pivotal role in that process. Inadequate or inaccurate data can hinder an insurer’s ability to assess liabilities accurately or calculate buy-out pricing, creating roadblocks in the buy-in or buy-out process. Additionally, issues such as incomplete member records, historical errors, and inconsistent data formats often necessitate time-consuming and costly remediation efforts.
“While general preparedness for endgame strategies remains a challenge, it’s encouraging that many trustees are being proactive and seeking guidance and advice ahead of approaching an insurer. In doing so, trustees will be best placed to evaluate and enhance their data quality, minimise barriers and strengthen their position. With evolving market conditions, prioritising preparation, and in particular, data readiness, this ensures a smoother transition and better outcomes for members. Accurate and well-maintained data is not just a technical requirement, it’s the foundation of a successful endgame strategy.”
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