Defined benefit (DB) scheme running costs increased by an average of 37 per cent over the past year, with nearly a third (32 per cent) of DB schemes seeing their costs rise by over 50 per cent, research from TPT Retirement Solutions has revealed.

In addition to this, the survey found that nine in ten DB scheme trustees (90 per cent) have seen running costs increase by more than 10 per cent in the past 12 months.

In particular, trustees highlighted increases in actuarial services costs (19 per cent), technology and data services (19 per cent), and covenant services (13 per cent) as the biggest increases in expenses.

However, legal and administrative services (both 8 per cent) were least often cited as the costs with the highest increase.

Beyond increasing costs, almost all (99 per cent) trustees said they had found the pace of new regulations a major challenge in the past year.

In particular, nearly four in ten trustees (38 per cent) said that new environmental, social and governance (ESG)-related regulations rules, such as Task Force on Climate-Related Financial Disclosures (TCFD) reporting, were the most challenging to deal with.

Meanwhile, the new DB Funding Code and General Funding Code were seen as the most challenging by 22 per cent of trustees, while the same number (22 per cent) consider the Pension Schemes Act 2021 as the most difficult piece of regulation to navigate.

Alongside these challenges, 29 per cent of trustees viewed accessing different asset classes as a "significant challenge" they are facing.

Dashboards presented a further concern, as almost a quarter (24 per cent) of respondents raised pensions dashboards readiness, while 23 per cent viewed covenant negotiations as a major concern, and 23 per cent viewed scheme administration as a major issue.

Amid this backdrop, TPT Retirement Solutions commercial director, Nicholas Clapp, suggested that "it is the perfect time for trustees to review the current operating model and to explore options to mitigate these increasing expenses".

“Our research has found trustees are finding the current regulatory and price environment very challenging," he stated.

"As the regulatory environment becomes more complex, costs will likely continue to increase as trustees increasingly rely on advisers to support them.

"An average increase of 37 per cent in running costs is unsustainable and makes it important for trustees to assess the value for money that they are receiving.

"It is the perfect time for trustees to review the current operating model and to explore options to mitigate these increasing expenses. Managing running costs is particularly important if a scheme is considering run on as part of its endgame solution.

“Consolidation may prove to be a highly sought-after solution to the issues trustees are facing. We have designed DB Connect to help offer a valuable solution for trustees that can manage complex regulations and uses scale to reduce the costs of running a scheme.

"This can allow trustees to focus their time on looking after the strategic direction of the scheme, instead of worrying about running costs and regulatory changes.”

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