Nearly half of the defined benefit (DB) schemes analysed by the UK’s pensions regulator are closed to future accruals, according to its latest annual “landscape report” on DB schemes, including hybrid schemes.
The dataset covers 5,604 schemes, effective as at 31 March 2020. The Pensions Regulator (TPR) said the declining universe – in terms of the year-on-year population presented in its statistical release – reflected schemes completing the process of winding up, scheme mergers and schemes entering the Pension Protection Fund.
TPR also said around 200 “Relevant Small DB schemes” were excluded from the dataset compared with previous releases, for reasons including increasing differences in the data collected about these schemes.
In 2012, according to TPR’s data, 28% of schemes were closed to future accrual, but in 2020 the proportion stood at 47%.
That compares with 10% for open schemes, 40% closed to new members, and 3% of schemes being in the process of winding up.
According to Barnett Waddingham, the growth in the proportion of schemes closed to future accrual meant more and more DB pension schemes were taking the first step to manage pension liabilities, reduce costs and ultimately secure the liabilities with an insurer.
Simon Taylor, partner at Barnett Waddingham, said: “The percentage of private sector schemes closed to future accrual has risen again this year, and by next year it’s likely to make up more than half of all schemes.
“More scheme sponsors will be looking to control cost and risk following the pandemic, therefore consulting with members to cease accrual. This will put them firmly on track for their strategy to reach endgame.”
The UK has a large number of small DB schemes. According to the TPR data, schemes with more than 5,000 members account for almost 75% of each of the population total of assets, liabilities and members, while only forming around 7% of the total number of schemes in the main dataset.
Conversely, TPR said, schemes with fewer than 1,000 members make up around 80% of the total number of schemes but only around 10% of total assets, liabilities and members.
The overall deficit of DB schemes analysed by TPR stood at £203bn as at the end of March last year, when the full effects of the coronavirus pandemic began to be felt. The dataset underpinning the funding figures covers a lesser 5,339 schemes as the regulator said it could not calculate funding figures for all schemes in the parent population at the calculation effective date.
The TPR data can be found here.
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