Around 45 per cent of DB pension schemes that submitted valuations in 2021 extended the end of their recovery plan, compared to 35 per cent the year before, according to the latest benchmarking analysis from Hymans Robertson.
According to the first analysis on valuations following the Covid-19 outbreak, while markets quickly recovered from the pandemic’s initial shock, difficulties persisted.
The average recovery plan length has increased from 5.9 years in 2021 to 6.4 years on average, according to research conducted by the top pensions and financial services consultancy. But plans with less hedging in place may have received some good news as a result of the recent increases in gilt yields.
Hymans Robertson partner Laura McLaren says: “With the impact of the Covid-19 pandemic still being felt by economies, not least through the strong inflationary headwinds and ongoing certainty, it is good to see that, in general, the health of schemes is continuing to increase. Any further rises in gilt yields could see further reductions in liability values.
“With regulatory change building for some time, we expect the New DB Funding Code to arrive before the end of the year bringing further clarity. Before this takes place there is a good opportunity to use TPR’s analysis to benchmark current funding plans against today’s best practice. Benchmarking offers valuable insights into where TPR might ultimately set the ‘Fast Track’ parameters and will help schemes identify the key actions to take on covenant, investment, and funding to prepare for going ‘Fast-Track’ or ‘Bespoke’.”
