But, getting to buyout isn’t just about reaching the moon, it’s about landing safely.

Most schemes are already heading in the right direction through a combination of contributions, investment returns and the beneficial impact of time. On this part of the journey, it’s about monitoring progress and making minor adjustments to stay on course. It’s when you start to get close that schemes need to be nimble so they can capture opportunities which may allow them to start the most difficult part of their journey – the descent.

This final stage of the journey is where trustees really do need expert support in all of the key areas to ensure a safe and efficient landing. Without that expertise, the alternatives are stark… disappearing into space or a crash landing.

When it comes to insurance, small schemes in particular may need expert support in some areas. But with the right support it is very much possible to get best value from the insurance market and achieve buyout efficiently.

The secret is to bring in the right partners at the key stages. Whether it’s insurance broking to generate competition and get best pricing, data cleansing to ensure you have all the key fields, monitoring your funding position to capture the opportunity in the first place, or having an asset platform to allow quick and efficient movement of funds, working with the best partners will help you get the best outcome.

In each case, to achieve the best outcome, there are certain things that need to happen.

There are key points in the process where it makes a difference if you have the right partner.

1. Monitoring – real time monitoring of the buyout position is essential in identifying when to begin your ‘descent’ to buyout. Without it, opportunities will be missed including the March 2020 spike in bond yields, which led to a temporary fall in bulk annuity prices. Clients who were monitoring and ready to transact were able to buy into this discount and save up to 15% on expected costs. With yields rising in January 2022, we may see similar opportunities soon.  

2. Data – accurate and up-to-date member data is essential to obtaining quotes. Inclusion of full postcode data and all-important marital status and age differences will help to get better pricing for most schemes. Legal certainty on key elements of the benefits is also essential, including equalisation and closure to accrual. Put simply, better data and certainty on benefits means better pricing. Straightforward data cleansing on postcodes and spouses’ data can reduce pricing by up to 5%. 

3. Broking – using a partner with detailed market knowledge and strong relationships with all insurers will make a difference. They know how and when to approach insurers to get best pricing. We always work with a specialist broker to ensure our clients - especially smaller schemes - get best value from the market. For the deals we completed in 2021, the average saving due to preparation and broking was over 10%.

4. Investments – by using an investment platform, trustees can move assets quickly and efficiently between funds or into cash as needed. This is critical during an insurance transaction because it allows trustees to reposition assets quickly to lock-in funding gains and to match any price-lock provided by the insurer. Trustees also benefit from low ongoing and transition fees.

5. Due diligence – the Financial Services Compensation Scheme provides a very high level of comfort for trustees (and members) but for those who want an extra level of reassurance, we can bring in an independent expert to assess the strength of the selected insurer.

For many smaller schemes these partnerships really do make a difference and can make insurance transactions affordable. With consolidators entering the market in 2022, there is potential for greater competition and even better pricing. On top of that, we’ve seen improved market conditions over December and January leading to further reductions in insurance pricing. Small schemes have been circling the moon for some time, but the time is now right for them to start their descent and land safely.