Commenting, Chris Bunford, Principal in LCP’s Research team, said: “The figures show that while there has been progress, the headwinds that pension schemes have had to battle against falling interest rates is clear. This can be seen by the fact that average contributions to schemes in deficit remain at similar levels to three years ago.
“The figures are a pre-pandemic snapshot but show that over the period a lot more schemes were in surplus and that there was also improvement in the covenant of sponsors of schemes in deficit. This may have cushioned the impact of the pandemic for many schemes.”
“The figures also appear to show that in the last three years, assumed life expectancy for those ages 45 decreased by a year.”
“There has also been a decrease in the amount of schemes using contingent assets, with 16.1% currently using them compares to 18.9% three years ago. With the increased interest in using these assets as a result of regulatory changes, we think more schemes now have them in place.
Other interesting highlights included:
• Recovery Plan length significantly down – median length down to 5 years from 7 years at the previous valuation
• Investment in returns seeking assets significantly down. The majority of schemes have less than 40% assets invested in returns-seeking classes, with fewer than one fifth having more than 60% in returns-seeking classes.
• Average discount rates have dropped significantly, by around 1%, over the 3 years. It is interesting that this has not had a more negative impact on scheme funding.
• Number of schemes with actives dropped significantly – 34.7% compared to 43.5% 3 years ago
TPR Scheme funding analysis 2021
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