Buying out all scheme liabilities and winding up the scheme is often the hardest job a board of trustees will ever be faced with. We hear a number of myths and rumours flying around, from trustees, pension managers, companies and even consultants who specialise in other areas! 

Over the last year we have brought wind up to life, and across five blogs we’ve taken readers along the winding road to the end of a scheme’s lifecycle, showing them how to navigate some of the key pitfalls and considerations that may otherwise have been forgotten, and steered them clear of some common myths and misconceptions. 

Myth 1: “Wind up is straightforward”

Wind up is a complex, multi-stakeholder project, often spanning many years – fully insuring all the scheme’s liabilities with an insurance company is just the first of many checkpoints to clear along the way. It is vital that planning starts early and there is someone responsible for planning, overseeing and directing the various tasks for it to stay on track. 

Myth 2: “My data is good quality and buy-out ready…”

For some, ensuring data is ‘buyout ready’ may feel like a surprise and/or a particularly uphill stretch, but it must be undertaken as it’s the absolute last chance trustees have to meet their ultimate obligation of paying the right members the right benefits at the right time. Carrying out a full data ‘MOT’ can help flush out any systemic or historic errors, and give trustees confidence in the data they’re insuring.    

Myth 3: “We’ll get a lot of member complaints if we wind up…”

Of course, this is not a journey that trustees make alone – members need to be at the heart of it.  Developing a communications strategy and keeping members informed of what’s happening and why will help ensure smooth passage as well as reducing the likelihood of receiving lots of time consuming queries and potentially complaints.

Myth 4: “I’ve done a buy-in so I know what I’m doing”

It often comes as a surprise to trustees without previous wind up experience, the steps needed to move from buy-in transaction to buy-out and full wind up. Dealing with data cleansing and finalising scheme benefits and discretions, discharging AVCs, DC benefits or historic annuities, reconciling and equalising GMPs and considering any residual risks and how to mitigate them all need considered before you can fully complete your journey.

Myth 5: “Having a surplus is easier than having a deficit”

As trustees are nearing their final destination of full wind up, sometimes what seems like a positive can come with additional challenges - namely a funding surplus.  Dealing with a surplus, expected or not, requires the careful setting up of a surplus balance sheet (to map out all the scheme costs, expenses and adviser fees) and can involve difficult decisions and negotiations over its use and distribution. 

We hope that you have found this series of five blogs informative and helpful – if we can leave you with one key message to take along with you on your journey, it would be that forward planning and strong project oversight and direction is absolutely critical for safe passage through to the ultimate trustee destination of full wind up.  Only by developing a robust, all-encompassing plan from the outset can you map out all work areas, ensuring that no stone is left unturned, as well as enabling you to take advantage of efficiencies along the way. 

“By failing to prepare, you are preparing to fail” – Benjamin Franklin

If you’d like to talk to us about your scheme’s wind up journey, and what we can do to turn it from a complicated, winding road to navigate to a manageable set of checkpoints to work through – please get in touch.