Smoothing the journey from buy-in to wind-up

A quicker than expected buy-in process is creating glaring gaps for a DB pension scheme’s wind-up process, says Hymans Robertson, as it releases the latest paper in its 2025 Risk Transfer series. It warns that leaving wind-up activity until the last minute, and in some cases after a buy-in has begun, is creating numerous problems for schemes.

With buy-ins completing more quickly than many schemes had planned for, many wind-up and buy out processes are not being completed in time. Schemes and Trustees are urged to act quickly to ensure the activity that needs to be completed – in relation to data, benefits, and assets – is part of their wind-up plan.

The leading pensions and actuarial consultancy claims, that, due to this, schemes face a potential erosion of surplus with additional costs impacting both members and sponsors. In addition to cost, timescales for wind-up are often ill judged with the buy-in to buy-out journey taking far longer than anticipated.

Commenting on the need for schemes to fully review their wind-up and buy-out process, Jo Gyte, Partner, Hymans Robertson says:

“The pace of change within the buy-in market has been unprecedented in recent years and we understand that schemes are eager to take advantage of insurer pricing and market change, and move to buy-in quickly. However, schemes are at risk of failing to start the essential work required to wind-up, vastly underestimating the cost and time required, and having to incur additional running costs which could have been avoided.

“From our experience we know that the two to three year expectation for wind-up can creep into three to five years when a buy-in occurred more quickly than expected. We would urge Trustees and Sponsors to mitigate the three key risks – in relation to data, benefits and assets – as soon as possible and start their planning as early as they can. Developing a wind-up strategy ahead of their buy-in can be the most effective way to ensure assets are ready, risk can be managed, and data has been reviewed. Our paper provides details of the key questions that schemes should ask to ensure they have a full picture of the steps needed for a scheme’s wind up, prior to beginning their buy-in negotiation with the insurer.”