LCP’s latest DB pension survey highlights that schemes have taken advantage of the relative calm of the last year compared to the turbulence of the previous years to make progress on endgame planning, net zero targets and tackling DEI issues.
The annual Chart Your Own Course report includes over 200 UK DB pension schemes with values ranging from under £10m to over £15bn.
The report highlights that many schemes have seen improvements in their funding positions and are exploring various endgame options. Completing a de-risking transaction remains a top priority for many, as many see their timelines to full insurance transactions continue to shrink, with target timelines of 3 years or less becoming increasingly common.
Key takeaways from the survey include:
- Self-sufficiency or active run-on is becoming more popular among smaller and medium-sized schemes. Amongst schemes between £500m and £1bn, the proportion targeting run-on/self-sufficiency for their long-term objective increased from 33% in 2033 to 57% in this year’s survey.
- Insurance remains popular, with 25% of respondents saying that completing a de-risking transaction is the top priority for their scheme in the coming year.
- The proportion expecting their final full insurance transaction to be 10+ years away has fallen sharply, while target timeframes of less than 3 years are increasingly common.
When it comes to Diversity, Equity, and Inclusion (DEI), more initiatives are taking positive steps. The largest schemes are leading the way, with almost 80% of those over £5bn having taken specific steps to in relation to DEI issues. Encouragingly, around 50% of initiatives of all sizes, including those under £500m, have also taken steps. However, a significant minority (around 30%) support DEI but have not yet taken action.
It is also similar to the sentiment of net-zero strategies. Among schemes over £5bn, 90% now have a net zero target or are working through the practicalities. But medium and smaller schemes are also taking steps—the equivalent figure for schemes in the £500m-£1bn range is over 60%, and almost 40% for schemes below £500m.
LCP is urging schemes to maintain this momentum by continuing to be proactive in agreeing on endgame targets and timescales and managing journeys to get there by tackling systemic risks such as climate risk.
Commenting on the report, LCP Partner Jon Forsyth said: “After years of mixed outcomes for DB pensions, the recent year has brought about a notable shift in a positive direction for most of these schemes. Funding positions have shown continuous signs of improvement, pointing towards a more secure financial standing.
“Against this backdrop, our survey results show that lots of schemes have taken proactive measures in various key areas, including endgame strategies, climate risk, and addressing Diversity, Equity & Inclusion (DE&I) issues. It is encouraging to see that schemes are taking control of their journey, and it would be great to see schemes keeping up this momentum to ensure that members receive the best outcomes.”
