However, while not every scheme saw an improvement in their funding position, LCP said it was fewer than one tenth that did not see their funding position worsen over the last year.

Regarding DB schemes’ endgame strategies, LCP revealed self-sufficiency or active run-on is becoming an increasingly popular option among smaller to medium sized schemes. It found among schemes between £500m and £1bn in AUM, the number targeting run-on or self-sufficiency as their endgame strategy rose by 57%, compared to 33% in last year’s survey.

For the smallest schemes, the report showed full insurance remained the most popular endgame option. It also found one quarter of the respondents said completing a de-risking transaction remained the most important priority for their scheme, with the proportion of schemes expecting a full insurance transaction to be more than ten years away decreasing and a rise in the number of schemes with a target timeframe of less than three years.

With regards to endgame journey planning, the report found changing funding levels have been the “key driver” for journey planning over the last few years. LCP said this was “not surprising” given the gilts crisis caused by the Mini Budget in September 2022 which saw an improvement in the funding position of underhedged schemes over a short period of time.

Source: LCP

The report found when it comes to establishing net-zero targets, for the largest schemes with more than £5bn AUM, nine in ten had either set a net-zero target and LCP said this may consist of building on the work they are doing to meet their climate reporting requirements.

For schemes with between £500m and £1bn in AUM, LCP found three fifths had taken similar steps, and there had been a “significant uptick” in the number of schemes with less than £500m in AUM following suit despite being under no regulatory pressure to do so. The firm added there were many schemes which were working through the practicalities of setting a net-zero goal and noted progress in reaching an agreement over targets can be “slow”.

On diversity, equity and inclusion (DEI), LCP found overall 50% of schemes of all sizes had taken measures to improve DEI, with the largest schemes being most prominent in enacting DEI initiatives as four in five of the largest schemes had taken DEI measures. The report also found while 30% indicated their support for DEI, they had so far not taken steps to put DEI measures into place.

Source: LCP

LCP partner Jon Forsyth said: “After years of mixed outcomes for DB pensions, the recent year has brought about a notable shift in a positive direction for most of these schemes. Funding positions have shown continuous signs of improvement, pointing towards a more secure financial standing.

“Against this backdrop, our survey results show that lots of schemes have taken proactive measures in various key areas, including endgame strategies, climate risk, and addressing DEI issues. It is encouraging to see that schemes are taking control of their journey, and it would be great to see schemes keeping up this momentum to ensure that members receive the best outcomes.”

Source: Professional Pensions