DB schemes in the ‘squeezed middle’ urged to review their options and reset objectives

DB schemes with assets between £10m and £250m are the new ‘squeezed middle’, says Hymans Robertson as the firm releases the latest update to its ‘Excellence in Endgames’ insights hub. The leading pensions and financial services consultancy highlights that endgame options are likely to be more limited for this squeezed middle than for both larger and smaller schemes.

Hymans Robertson’s analysis reveals the full range of endgame options and the associated scheme characteristics in each case. The analysis also highlights why it’s vital for all schemes - especially those in the squeezed middle - to review the full range of options and reset their objectives.

Commenting on the need for the squeezed middle to reset their objectives, Jonathan Seed, Partner, Hymans Robertson says:

“The pace of change for DB schemes has been unprecedented in recent years, and this has created a new landscape with some exciting new and emerging solutions. However there are challenges as well, in particular for the 2,500 schemes in the squeezed middle. That’s why it’s essential for schemes to assess the new landscape, consider all their options using our insights hub and reset their strategy if necessary.

“Strategies for the squeezed middle also need to be flexible so that schemes can adapt to changes in the market. That means having a clear target, but also having a ‘plan B’ to deal with market shocks or unexpected scheme issues like a sudden change in covenant strength. ‘Set and forget’ strategies should be replaced by dynamic strategies to ensure schemes stay on track but can also adapt to change and take advantage of new opportunities that may arise.

“Finally, schemes must remember that time can be a valuable ally. It’s important that they move towards their target at the right pace, not the fastest pace. Doing so lets schemes benefit from valuable tailwinds, including reducing insurance costs and expected investment outperformance. It also gives time to make progress on essential data and governance tasks. Keeping a close eye on the strategic target and moving towards it at the right pace will help to ensure a good outcome for schemes in the squeezed middle.”

The Hymans Robertson Excellence in Endgames insights hub and decision-making tree can be found here.