After a volatile end to 2022 and the rising interest rates over the course of the year, many pension schemes are much closer to endgame than they were a year ago. With the unprecedented rise in yields, followed by the Mini Budget in September, many schemes have redirected their focus to their interest rate and inflation hedging strategies whilst ensuring appropriate liquidity. Due to this some schemes considering partial pensioner buy-ins have paused to ensure there is sufficient scheme liquidity. On the other hand, other schemes have been able to move quickly, endorsing the importance of transaction readiness in a market of short-lived pricing opportunities.
Many will agree that the potentially huge changes to their endgame planning was ultimately a good thing for schemes. None the less, the sudden improvements have given schemes new challenges to consider, such as: investment considerations, preparation for buyout and reaching the end of the track. Defined benefit trustees will need to collaborate with their scheme’s sponsors to work towards their mutually desired endgame strategies. Providers will need to keep on top of responding to the new world of less efficient LDI, the prospect of new rules on pension scheme funding, exploring new options for endgame, plus higher for longer inflation and interest rates.