Covid-19 delays the endgame


As the defined benefit (DB) pension landscape has matured, the focus of companies and trustees has naturally shifted to the endgame. If a longterm plan to reach endgame is not already in place, regulation will soon make this a necessity. From a funding perspective, The Pensions Regulator’s (TPR) review of the funding regime is arriving at a difficult time. Covid-19 has put unprecedented strain on businesses, while at the same time putting downward pressure on DB scheme funding levels. Reaching the DB pension endgame will now undoubtedly be a more demanding target for many schemes.

In this analysis of the FTSE350 companies with DB pension obligations, we quantify how the economic turmoil of Covid-19 has impacted on the path to endgame.

At the beginning of the year, with the world unwittingly on the edge of a precipice, the outlook for the UK’s DB schemes looked fairly clear. While government bond yields had fallen during 2019, strong equity market performance and falling inflation expectations provided a relatively benign backdrop for DB scheme funding. In early March, TPR published its consultation on a revised DB funding code of practice, setting out its intentions for the future regulation of DB scheme funding, and broadly committing to paper the messages that it had been communicating over the previous couple of years.

Read the full report here