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Big schemes – DB pensions heading for the end game

Published by Andrew Vaughan on

As the industry’s focus shifts to the endgame for DB pensions, the largest schemes will once again be leading the way in developing innovative strategies to manage the final chapters of DB pension provision.

Our annual analysis of DB schemes in the UK is now available. As the only research of its kind, it highlights the continued decline in DB schemes and the shifting focus of employers towards the DB pensions endgame.

The decline of the DB pension and entering the endgame

This survey shows that only 52% of final salary schemes remain open to future accrual - a decrease compared to last year’s 57% - and just 3% open to new joiners, reflecting the continued decline of DB pension provision. As well as encouragement from The Pensions Regulator, the continued closure and the ageing membership of DB schemes will be focusing the attention of trustees and companies on the endgame process.

“For the seventh year in a row, our unique insights show a continued decrease in the number of schemes remaining open to the future accrual of benefits. The focus of companies should now be shifting to the endgame for their DB pension scheme...Efficient risk management of DB schemes over their remaining lifetime will now be the primary objective for companies – a stark contrast from the original purpose of operating a DB scheme.”
Andrew Vaughan

Managing your liabilities

Liability management exercises are useful levers for companies and schemes in managing the endgame process and continue to increase in popularity. Around 95% of schemes experienced an increase in transfer value payments, and around a third of schemes saw an increase in transfer value payments of 200% or more - considerably higher than the 7% of schemes above this threshold last year; this reflects an increase in the number of companies and schemes undertaking exercises as part of a structured endgame process focused on reducing balance sheet risk and cost.

Key findings:

ONLY 52%

of schemes remain open to future accrual of benefits

ONE THIRD

of schemes experienced a threefold increase in transfer value payments

100%

The average funding level for the schemes (as measured on their accounting basis) reached 100% for the first time

7%

drop in assets allocated to equities compared to last year


Download the full report below.

Big schemes – DB pensions heading for the end game

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About the author

  • Andrew Vaughan

    Andrew advises a range of UK and international businesses on DB pension issues including pension scheme funding, risk reduction exercises, pension benefit design, M&A transactions and accounting disclosures.

    View Biography

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