Running on into retirement?

Maturing in age needn’t mean being in poor health. Nor does it rule out ambition. So how can DB schemes opting to ‘run on’ retain healthy funding levels, while also seeking to benefit from a growth mindset?

Our latest DB endgame paper focuses on ‘run-on’ and investing to both pay pensions and generate surplus in the endgame. As with strategy design in general, there is no one-size-fits-all solution. Schemes need to weigh up trade-offs when it comes to meeting their objectives. This paper is about understanding those trade-offs.

To do so, we believe it’s important that multiple potential investment and extraction policies are considered, so that schemes can select a strategy that best reflects their objectives, circumstances, and beliefs.  

We illustrate the trade-offs between benefit security and  surplus generation for two case studies. The first is focussed on long-term surplus generation, where we flex the investment strategy. The second considers more regular surplus extraction, where we flex the extraction criterion.

With high funding levels now common, our analytics demonstrate that in both cases we find it should often be  possible, regulations permitting, to generate substantial surpluses while maintaining a high level of benefit security.

Together with a strong qualitative understanding of the factors at play, we believe the framework we outline in this paper can put schemes in good stead to tackle the challenges they face.

Read the full article: Running on into retirement?

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