Report of the target endstates for defined benefit pension schemes working party 

by A. Aponte, D. Caleechurn, N. Jones, J. Kola, R. Littlewood, D. Mikulskis, K. Wesbroom and C. A. Yiasoumi*. 

(other working party members: S. Bala, M. Cliff, R. Farr, G. Henty, N. Johnson, T. Lord, J. Ralfe, and M. Stafford.) 

Presented to the Institute and Faculty of Actuaries, London: 11 January 2021

Abstract 

Running off the £2 trillion of UK corporate sector defined benefit liabilities in an efficient and effective fashion is the biggest challenge facing the UK pensions industry. As more and more defined benefit pension schemes start maturing the trustees running those schemes need to consider what their target end-state will be and the associated journey plan. Yet too few trustee boards have well articulated and robust plans. Determining the target end-state requires a grasp of various disciplines and an ability to work collaboratively across different professional advisers. This paper sets out issues trustees, employers and their advisers can consider when addressing whether their target end state should be lowdependency, buyout or transfer to a superfund. Member outcomes analysis is introduced as a central tool through which to differentiate between alternative target end-states. A five step methodology is set out for deriving an optimal target end-state for a scheme. Also considered are the specific factors impacting stressed schemes which highlights the importance to trustee boards when considering their Plan B should their employer or scheme ever become stressed. The paper ends with specific recommendations for the actuarial profession and The Pensions Regulator to take forward. 

Keywords 

Pensions; Funding; Defined benefit; End state; Low dependency; Member outcomes