‘Challenging’ 2020 forces 80% of DB schemes to reassess portfolios

The survey, which polled almost 100 trustees, found 85 per cent of respondents believed they needed to reassess their portfolios to see whether investments were generating sufficient returns, while almost the same number — 80 per cent — listed this as a priority for 2021.

The pandemic and the government’s lockdown strategy contributed to widespread fears that existing investment strategies were no longer achieving their objectives. 

Nearly three quarters — 71 per cent — of respondents said that, without selling growth assets, they would become increasingly reliant on deficit contributions or else would have to invest in income-generating assets to meet pension payments. 

Reflecting the impact of the lockdown upon sponsors, almost 96 per cent of respondents said they would have to realign their investment strategies to meet their long-term funding objectives.

Ajeet Manjrekar, co-head of solutions at River and Mercantile, said: “After a challenging 2020 for trustees and sponsors, it is clear schemes’ investment strategies need to target the right level of return to drive long-term funding success.

“While end games differ, many schemes have taken a step back from the funding progress of previous years, with 2020 being a lost year for some schemes. This is now a significant issue as schemes are getting more mature and paying out increasing amounts in pension payments.”

Tim Middleton, head of technical at the PMI, warned that 2021 “could be as much of a challenge for trustees and pension schemes to navigate as last year”.

The PMI has launched a fiduciary management research group to “explore the key emerging themes, market developments, and how trustees can mitigate the challenges now and for the near, medium and long term”, Mr Middleton said.

Alongside the PMI and River and Mercantile, the group includes representatives from several consultants, independent trustee companies and pension funds.