Many DB schemes miss long-term funding goals
Nearly half of medium-sized defined benefit pension schemes in the UK lack long-term funding targets. The shortfall grows among larger schemes, where 64% have yet to set one.
Smaller schemes lead in setting targets
Actuarial consultancy Barnett Waddingham found a clear divide by scheme size. While 63% of small schemes have set long-term funding targets, only 36% of very large schemes have done so. Medium and large schemes fall in between, at 50% and 46% respectively.
The survey included responses from 50 professional trustees. Many schemes without targets expect to set them within the next two years. Among medium-sized schemes, 44% of trustees said most would finalize targets within 12 months. For very large schemes, 45% of trustees shared this expectation.
Market changes delay decisions
Improved funding levels and new market options have given trustees more flexibility. Buyout was once the default exit strategy, but alternatives like defined benefit superfunds are now gaining attention.
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Ian Mills, partner and head of DB endgame strategy at Barnett Waddingham, said the market is changing. Many trustees are reconsidering plans to pursue buyout immediately. Some are exploring running schemes beyond full funding or transferring assets to superfunds.
This hesitation varies by scheme size. Smaller schemes, with fewer options, tend to act faster. Larger schemes face more complex considerations, including sponsor strength and member needs. Small schemes expect to reach their endgame objectives in an average of 5.8 years, while large schemes anticipate 9.3 years. Over half of large schemes believe it will take between 10 and 15 years to finalize plans.
Pressure to act, but not to rush
Mills noted that setting a clear funding target is important but requires careful thought. “These decisions cannot be rushed,” he said. “But the sooner a target is set, the sooner trustees and sponsors can move forward with confidence.”
With nearly half of all schemes still without a long-term target, the next 12 to 24 months may bring many new plans.
