Two thirds of audience at LCP’s DB pensions conference think that DB pensions ‘not a success story’

At LCP’s recent annual conference for representatives of UK DB pension schemes, a poll found that two thirds of the 360 attendees believed that UK DB pensions are “not a success story”.

This is despite around 90% of polled attendees voting that their schemes were financially in a better place than three years ago. Latest stats from LCP also indicate that UK DB schemes are now on average around 90% funded on a buyout basis, compared to around 70% as little as 5 years ago.

The polls were taken during panel sessions discussing DB pension scheme funding and the Chancellor’s ongoing Mansion House proposals. This includes LCP’s “Powering Possibility in Pensions” proposal that is being further consulted on by the Government over the winter, which aims to ensure that well-funded DB schemes can be a success for their members, their sponsoring employers, current DC savers and the wider UK. More details on LCP’s proposals are here.

Jon Forsyth, Partner at LCP, commented: “It’s fascinating that at a time when schemes are benefitting from much improved levels of funding, a wider raft of end-game opportunities, and political recognition given their importance to UK growth, that most of the industry don’t see DB pensions as a success story.

“This mood may stem from the implications for members of recent high inflation, with most schemes not offering full inflation protection. Or it could be that so many schemes have closed before they were able to benefit from the current market conditions, and so many younger members have been forced into DC pensions with significantly worse expected outcomes. All this whilst sponsors have had to pay huge sums to support lower and lower returns being delivered by DB schemes.

“However, our message is that there is lots of room for optimism as there is a genuine opportunity now to revisit strategies in order to reap rewards for sponsors and scheme members.”

Steve Hodder, Partner at LCP, added: “Whilst collectively DB schemes have made great strides in their funding positions, it’s becoming clear that this isn’t an unmitigated success. We are seeing a sense of “missed opportunity” emerge across all key stakeholders including DB members, sponsoring employers and current DC workforces. And the Chancellor is wondering why the £1tn of assets in DB schemes isn’t doing more to support the UK’s growth or transition to Net Zero.

“We think that very well-funded DB schemes be an asset to all of these stakeholders. “This really speaks to our “Powering Possibility in Pensions” proposal, which would enable all of these stakeholders to better benefit from DB schemes. We were delighted to see the Autumn Statement confirm that this idea will be further consulted on over the winter.”