Some fiduciary managers have no recent experience of guiding schemes through buyout, with 31% saying they had completed no buyouts in the past 5 years, research from XPS Pensions Group has found.
A survey of 13 fiduciary managers with over £150 billion in assets under management found that despite schemes’ strong net funding positions, a number of fiduciary managers’ ‘low dependency’ targets involved discount rates that were higher than the Pensions Regulator’s ‘Fast Track’ level. This could mean they will be subject to additional scrutiny.
These findings come as the market for buyouts has become more competitive. Rising gilt yields mean that UK schemes are in the strongest financial position they have been in for some time. XPS Pensions Group’s DB:UK tracker shows schemes’ net funding position at 102%, as at 24 March, which continues to increase demand on the market for insurers’ buyout services.
The survey also found differing opinions between FMs and clients over how fees should be structured over the course of a scheme’s lifecycle. Around half of FMs said that they do not offer fee reductions as their clients de-risk. In contrast, 90% of their clients said that fees should reduce as schemes’ investments are de-risked*.
Adam Rouledge, Senior Consultant at XPS Pensions Group, said: “It’s clear that the funding position of schemes are improving across the board. As schemes approach their endgame, it’s important for schemes to ensure that their FM’s approach to long-term planning aligns with their own and will serve their members’ best interests.”
XPS Investment FM Watch March 2023
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