The firm warns a common vision is vital; without one there’s a risk of wasting management time and excessive spending on advisor costs, with both parties pulling in opposite directions for their desired end goals. The majority of practical issues can also be resolved fairly easily if there is a common shared purpose.
The leading pensions and financial services consultancy cautions that stakeholders must work together to maintain sight of their key objective of making run-on work. Exploring the merits, through detailed and considered strategic planning, will ensure all stakeholders are working together.
For most DB schemes, the discussion at this stage will centre one of four options: a realisation that more thought is required; a preference for risk transfer; deferring decision-making or, agreement that run-on is the most appropriate solution. Working together and looking at all available options, will ensure that future challenges are manageable, and all of those involved fully understand the path ahead.
Commenting on why DB sponsors and trustees should unite to explore the feasibility of run-on before diving into the granular detail, Leonard Bowman, Head of Corporate Consulting, Hymans Robertson says: “Run-on can be a very powerful and attractive option, for all stakeholders. However, it can also open up a daunting number of issues and decisions to consider. It’s very easy to lose sight and end up not being able to see the wood for the trees. It is tempting to dive straight into detailed analysis, but that could lead to wasted time and money. Ultimately, it is key that all stakeholders work together to keep the big picture in mind and see value in the feasibility of run-on. There must be a common vision that run-on is worth deeper investigation.
“The starting point is to get the company and the trustees around a table to discuss all of the options. This will ensure that the respective benefits and challenges are heard and explored, and a common end-goal is reached. Our insight hub, can help direct thought around the key issues to be addressed, helping to structure conversations, ensuring that this upfront investment of time will give confidence to all stakeholders.
“When getting round the table, it is important that any past positions and comments are parked and previous assumptions are put to one side. Start with a genuine blank sheet of paper and open mind. Whilst detailed analysis is not needed at this principles based stage, it is worth checking that all options under consideration are allowed legally. Although an unresolvable legal issue is rare, seeking legal advice early will avoid future wasted time or spend.
“By having this initial, principles based discussion, it ensures that all stakeholders see value in taking the next steps, getting advice and taking time to make decisions. They will then be fully aware of what work needs to be done to meet the needs of scheme members, the trustees and the sponsor.”
The Hymans Robertson Excellence in Endgames insights hub and decision-making tree can be found here.
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