ASTRO is an endgame framework for defined benefit pension schemes, aimed at running a pension scheme in a highly secure, low risk way whilst explicitly aiming to generate surplus over time. By doing so, the strategy seeks to deliver tangible economic benefits to the key stakeholders of the scheme - improved retirement outcomes for members and direct financial benefits to the sponsor.

ASTRO is a framework strategy based on Aon’s extensive experience of best practice on clients that have chosen to run-on. The framework is not a one-size-fits-all solution and is intended to be adapted to scheme specific circumstances and objectives. In particular, ASTRO strategies can be deployed both for short periods (with the expectation to buyout with an insurer after that period has elapsed) or as a long-term endgame strategy. It can also be adopted as a scheme’s long-term objective in anticipation of The Pensions Regulator’s new funding regime.

The key elements of the core ASTRO framework are:

  • Invest like an insurer - adopt an asset strategy that is low volatility but provides meaningful outperformance of around 1.5% a year above risk-free rates (for example by investing in credit assets). Such a portfolio need not be any riskier than a typical insurer’s own asset strategy and can have lower volatility relative to bulk annuity pricing than ultra-low return strategies.
  • Multi-layer protection – A robust security package for members’ benefits that is based on; a high level of funding, the active ongoing support of a strong employer covenant and additional liquid security to cover the event of employer default.
  • Better outcomes for members – delivering a positive impact on the overall membership of the scheme either through continued access to benefit options and member support that might typically be lost when insuring, or explicit discretionary benefits funded from surplus.
  • Financial payback for the sponsor – direct financial benefit to the sponsor as compensation for supporting the scheme, in the form of a refund of surplus or subsidy of DC contributions to current employees. There are additional accounting benefits for some employers.

ASTRO is generally a best fit for mid-to-large schemes (typically £100 million or more of assets) with a strong or tending-to-strong sponsoring employer (or access to additional covenant support). These schemes can target material levels of surplus over time whilst maintaining exceptionally high levels of security for members.

ASTRO draws together our extensive experience of implementing run-on strategies for our clients, combining best practice from our specialists within covenant, investment, funding and governance services.

Further information on ASTRO and the benefits of running your scheme on can be seen to the right of this page.