On the go: The number of defined benefit pension schemes with assets of more than £1bn has increased by 90 per cent since 2013, according to research by Barnett Waddingham.
Eight years ago there were 154 DB schemes with assets above £1bn, and by 2021 that number had risen to 290, the research found.
The pensions consultancy expects the growth in the number of very large schemes to continue into the medium term.
Barnett Waddingham said that many of the large schemes involved in its research are aiming for an insurer buyout. However, without “significant expansion” of the current market, the large and often complex nature of the schemes may put a limit on the number of such transactions that could take place in any one year.
Elsewhere, the research found the percentage of schemes closed to accrual in 2021 stood at 55 per cent — an increase of 40 percentage points since the consultancy began its research on large DB schemes in 2013.
In addition, the research showed continued established trends seen in the industry, such as the sustained trend towards derisking.
For the largest schemes, with asset allocations of more than £5bn, bonds now make up more than 5 per cent of their assets. For slightly smaller schemes with assets of between £1bn and £5bn, bonds make up around 40 per cent of their portfolios.
Fifteen per cent of the schemes above £5bn were estimated to have a buyout time of less than two years, while transfer activity appeared to have slowed among the largest schemes, with 70 per cent of these schemes recording fewer transfers in 2021, Barnett Waddingham found.
Ali Tayyebi, partner at the consultancy, said: “While in many ways, this analysis shows a steady continuation of established trends, this is perhaps notable in itself given the nature of the period in question.
“The funding of large pension schemes appears, on average, to have been very robust to the turbulent economic markets of the past 18 months. Although the Covid-19 pandemic does not appear to have set back these pension schemes, many still have a long way to go to get to their endgames.”
He continued: “The demand for derisking actions will continue to accelerate, and schemes will need to be more proactive than ever in getting themselves to the ‘front of the queue’ — whether that is for IFA support on liability management exercises, with insurers for buy-in/buyout policies, or with sponsors for management time.”
