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Professional Pensions Webinar – Assessing the benefits of run-on

Brightwell recently partnered with Professional Pensions to deliver a webinar looking at the benefits of run-on.

Improvements in defined benefit (DB) funding levels and moves by the government to ease restrictions governing how well-funded schemes can use surpluses are leading to an increasing number of schemes to consider run-on¹.

The government issued its consultation on Options for Defined Benefit Schemes in March 2024 to look at the current treatment of scheme surpluses and how to remove some of the barriers to scheme run-on.

It took the first step down the road to making run-on more appealing by cutting in the tax rate on a refund of surplus from 35% to 25% from 6 April 2024. And, in January this year, Prime minister Keir Starmer and chancellor Rachel Reeves confirmed plans to lift restrictions around how DB schemes can use their surpluses – pledging to set out details of its new surplus policy in the government’s response to the Options for DB Schemes consultation, which it says will be published this Spring.

The impact of this move could be significant – allowing even more schemes to run-on and invest their assets for longer rather than immediately move to insurance-based options such as buy-in or buyout.

Industry modelling has shown the benefits of run-on could be substantial – with well-funded schemes being able to release substantial amounts of surplus over a ten-year period through such a strategy.

This briefing takes a deep dive into how run-on strategies could work in practice; the key considerations for trustees and sponsors; the potential ways in which sponsors could extract the surplus; and the advantages and disadvantages of such strategies when compared to insurance-based solutions such as buy-in and buyout.

If you’re interested in learning about the Brightwell approach to run-on, read our run-on toolkit here.