Pensions - Articles - Paradigm shift for DB pensions as schemes stay fully funded

The funding status for the UK’s 5,000-plus corporate defined benefit (DB) pension schemes continues to show that deficits have, on average, been neutralised with the aggregate deficit remaining at zero, PwC analysis shows.

 Assets and liability values both increased slightly over March, resulting in a similar position to last month, based on schemes’ own measures. While on aggregate there is no funding deficit, there will be individual schemes which are still in deficit and where recovery contributions will continue to be paid.

 PwC’s Adjusted Funding Index incorporates strategic changes available for most pension funds, including a move away from gilt investments to higher-return, cash flow generative assets, and a different approach for potential life expectancy improvements which are yet to happen. This measure shows a £180bn surplus.

 Raj Mody, partner and global head of pensions at PwC, said: "This is a paradigm shift for defined benefit pension schemes. The industry has become conditioned to expect pension funds to have deficits. It's not surprising that - after years of cash repair payments and investment returns - eventually they have reached a fully funded position, in aggregate at least. We'd expect this to hold for various reasons. As the economy recovers this will likely be positive for asset values relative to liability values.

 "There will be short-term volatility so trustees and sponsors will want to have contingency plans, even if in many cases this is simply monitoring and riding out the volatility because the company covenant and pension fund can bear it.

 “It's worth trustees taking a fresh look at their position to ensure they have an accurate assessment of any residual deficit, to avoid running unnecessary risk. In particular, there have been major changes to the way inflation and longevity could be forecast, and the approach in some schemes may now be out of date."

 The PwC Pension Funding Index and PwC Adjusted Funding Index figures are as follows:


Back to Index

Similar News to this Story

Gen Z savers are the most clued up about their pensions
New research from PensionBee, has revealed the varying retirement plans for each generation and how the coronavirus pandemic has affected them.
SPP calls for clarity from TPR prosecution policy
The Society of Pension Professionals (SPP), the representative body for a wide range of providers of advice and services to work-based pension schemes
Youth unemployment stores longer term financial challenges
Kate Smith, Head of Pensions at Aegon comments: “Although we have seen a slight fall in overall unemployment to February 2021, today’s labour market f

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS


Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.