Well over half (58%) of DB pension scheme members would support their scheme running on to generate a surplus, according to the latest Excellence in Endgames research paper from Hymans Robertson. While members are open to run-on strategies, a significant minority remain cautious, with nearly a third (32%) being uncomfortable and 10% unsure. The survey also found mixed views from members about how DB surplus should be used. The leading pensions and financial services consultancy believes this underlines the importance of effective communication with members by schemes and employers. The firm states that by focusing on thoughtful use of surplus, fairness and transparent communication, trustees and sponsors can deliver a strong member experience and ensure the best outcomes.
When questioned about surplus sharing it’s not surprising that over a third (38%) of members believed the surplus should be used solely to increase member benefits, while more than a quarter (27%) would prefer surplus to remain in the scheme to improve security. However, a fifth (20%) supported sharing surplus between members and the employer with, unexpectedly, as many as 7% saying surplus should be used entirely for the employer’s benefit.
Commenting on the need for DB Scheme Trustees to clearly communicate with members around run-on, Laura McLaren, Head of DB Scheme Actuary Services, Hymans Robertson, said: “A big opportunity of running on is the potential for members to benefit. Therefore, member experience and confidence offer a valuable lens through which to consider and design a run-on strategy and surplus-sharing framework.
“Clear, proactive communication is at the heart of member confidence. It’s vital for trustees to recognise that member understanding of endgame options is often limited. Our research has shown that while a majority are comfortable with their scheme running on to generate surplus, nearly one in three are either uncomfortable or unsure. It’s important that trustees and sponsors strengthen member confidence in the decisions that are made by a scheme about run-on by communicating openly. They can provide tailored messages to address specific concerns and emphasise the long-term security of the member’s pension. Transparent decision-making and communication around surplus use is also essential to maintain trust. Members will value things they understand.
“Whilst there’s no one-size fits all approach, ultimately, a successful run-on journey is one where members feel informed, secure, and confident that their interests are being looked after at every stage.”
Commenting on the role corporates have to play when making surplus sharing decisions, Sachin Patel, Head of Corporate DB, Hymans Robertson, said: “Understanding corporate priorities and how these align with member and trustee views is crucial. Even if enhancing member benefits is not always viewed by sponsors as a primary driver, it remains important for corporates to recognise and respond to member expectations.
“The success of run-on strategies and surplus sharing approaches hinges on early, constructive engagement between trustees and corporates. When this collaboration is thoughtful, transparent and focused on shared outcomes, it creates the foundation for a sustainable and positive run-on experience for everyone connected to the scheme.”
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