The average funding position and proportion of schemes in surplus are at their highest levels since the start of the current funding regime, according to Aon.
The data, which sets out the approaches to and results of UK pension schemes’ funding valuations completed up to July 2022, also found that for schemes in deficit, the average recovery period has fallen by only 1.2 years over the last three years.
Additionally, the percentage of schemes requiring a recovery plan fell from 68 per cent to 54 per cent.
Meanwhile, 70 per cent of schemes had both a technical provisioning target and a long-term financial target, and 59 per cent of those schemes had a roadmap to reach the target by the time the scheme is significantly mature.
Aon says that for the majority of schemes, attaining the existing funding objective in full will not be the end of the story. In order to lessen reliance on the employer covenant and achieve “low dependency” as a scheme grows, the long-term financing target and journey plan are now more in the spotlight thanks to the DWP’s consultant’s recent paper on long-term funding and investment strategy.
Once a scheme is “significantly mature,” this will likely necessitate a reduced risk investment strategy and a larger financing target, according to Aon.
The majority of schemes have already established such a target along with a route to get there, in accordance with regulatory guidelines, prior to this becoming a legal necessity.
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