This year’s analysis shows that the average funding position and proportion of schemes in surplus are at their highest levels since the start of the current funding regime.
Since the dates of these completed valuations, while average funding levels have remained relatively stable, there has been a particularly wide variation in the changes to the funding positions of schemes. The funding positions of some schemes have improved significantly.
Against this background, the new funding regime is currently expected to be implemented in April 2024, with its focus on a journey plan towards a long-term funding target, aiming to reduce reliance on the employer covenant and achieve ‘low dependency’ as a scheme matures. Ahead of this becoming a legislative requirement, the majority of schemes have already set such a target – and many have also produced a journey plan setting out how to get there - in line with regulatory guidance.
In addition, the Chancellor announced several initiatives in his Mansion House speech in July, including a call for evidence on how DB schemes could use their assets more flexibly. The ‘Mansion House reforms’ may support a wider range of endgame options for pension schemes.
Our full data-driven analysis aims to support our clients’ better decisions.
Highlights include;
• The average funding position and proportion of schemes in surplus are at their highest levels since the start of the current funding regime.
• For schemes in deficit, the average recovery period, of 4.3 years, was 1.2 years shorter than three years ago, when many schemes’ previous valuations were undertaken; the percentage of schemes requiring a recovery plan fell from 67% to 53% ;
• 63% of under-funded schemes had put in place additional security – the highest percentage to date ;
• Since the dates of these valuations, average funding levels have remained relatively stable but there is a wide variation between schemes; those schemes most exposed to gilt yield changes are likely to have improved their funding positions significantly;
• The Chancellor’s ‘Mansion house reforms’ may lead to an expansion in the endgame options available to schemes and further support alternative endgames to insurer buy-out.
|
