More than a third of DB pension schemes (35 per cent) are on track to meet The Pensions Regulator’s new ‘fast track’ regulations, according to benchmarking analysis from Hymans Robertson.
Hymans Roberston says this research points to an improving picture for scheme valuations, and implies that pensions schemes’ funding has remained relatively unscathed, despite the initial market disruption at the start of last year.
The research also found that almost half (46 per cent) of DB trustees surveyed said they expected they would experience regulator intervention before their next valuation.
Hymans Robertson partner Laura McLaren, says: “With the ongoing fallout from Covid-19, Brexit and numerous regulatory changes, the next round of recovery plans may highlight a more dispersed picture across schemes with sponsor covenant and affordability looking set to have the largest impacts.
“Further out, more regulatory change is coming with ‘fast track’ compliance having the potential to impact funding plans and push up cash requirements.
“When we questioned trustees about TPR’s forthcoming consultation, nearly half (44 per cent) said they would like more flexible fast track parameters with 41 per cent believing transitional arrangements would be helpful. A further 43 per cent want wider ‘bespoke’ flexibility while 41 per cent also wanted barriers to ‘levelling down’ existing funding plans.”
She adds: “TPR’s latest scheme funding analysis highlights the good progress many schemes are making but the outlook remains uncertain. With markets managing to recover strongly after last year’s initial disruption pension schemes, on the whole, are emerging in a good position, however for some there are likely to be longer lasting implications on sponsor covenant and affordability.
“TPR’s analysis provides schemes with a good opportunity to benchmark their current funding plans. Indeed, with the DB funding regime under review, this data offers valuable insight into where TPR might ultimately set the parameters within the framework when they publish the draft code at the end of this year. Even well-funded schemes will need to be able to demonstrate that they have clear, robust plans in place.”
