UK consultancy Hymans Robertson has launched a digital application to assist defined benefit (DB) pension schemes to build and implement a cohesive buyout strategy.
The framework – PACE (Plan, Aim, Check, Execute) – will help schemes paln their buyout journeys by using dynamic annuity pricing to benefit from the best insights on insurer pricing.
PACE integrates affordability, investment and due diligence considerations to build a robust plan, making the best use of time leading-up to the transaction to get schemes ready for buyout, the consultancy stated.
The app also uses dynamic annuity pricing to let schemes see how close they are to buy-out and what happens if things change. This new approach supports robust decision making, with dynamic progress checks and Hymans Robertsons’ risk transfer team ready to execute a transaction when the time comes, it added.
Laura McLaren, head of scheme actuary services at Hymans, said: “DB schemes targeting buyout need a cohesive strategy and plan to get there, and sooner rather than later. Our PACE framework helps schemes use the time they have in the most efficient way.”
She added that schemes need a “clear idea of the time that they expect buyout to be affordable”. “Insurer pricing isn’t ‘gilts plus’, so our PACE app uses dynamic annuity pricing to let schemes see how close they are to buy-out and what happens if things change,” she noted.
McLaren said pension funds can test how various funding and investment decisions would affect their journey to buyout, both in time and risk. “For example, how many years plans might accelerate by or how many more years they’d need to wait, and how large the average deficit could be in different scenarios,” she said.
She also stressed the need for schemes to know what to prioritise at each stage of their buyout journey, when to take action to control costs, and how to be ready to capture opportunities when they arise.
“There are a number of aspects that will impact on overall readiness,” she stated, giving the example of timescales for transitioning to a liquid buyout-ready portfolio and having signed off data and benefits.
McLaren added: “Schemes don’t want to put in place unintended blockers. Managed effectively with a clear timeframe in mind, these activities can support rather than dictate your journey plan. Our approach is designed to bring all of that together, with innovative digital tools robustly monitoring progress to check that plans are on track.”
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