UK defined benefit (DB) pension scheme trustees and sponsors have been urged to ensure they understand the full range of options available to “lock-in” recent funding improvements, after PwC’s analysis revealed that DB scheme funding remained “very strong” in March.

According to PwC's Buyout Index, DB pension schemes continued to have sufficient assets on average to buyout their pension promises, recording a surplus of £240bn in March.

Meanwhile, PwC’s Low Reliance Index, which tracks the position of the UK’s DB schemes based on a low-risk income-generating investment strategy, showed a near record surplus of £385bn.

Given the sustained improvements in funding levels, PwC pointed out that sponsors and trustees are increasingly re-evaluating the preferred endgame strategies for their pension schemes.

However, PwC head of pensions funding and transformation, John Dunn, said that while schemes have a "significant opportunity" to ‘lock-in’ improved funding positions to avoid a return to the world of deficits, the nature of the 'lock' will depend on "which endgame door sponsors and trustees wish to go through".

"For example, to buyout, run-on, transfer to a superfund or to alternative forms of consolidation including the proposed public sector consolidator," he continued.

“We are therefore supportive of the Work and Pensions Committee’s recent call for schemes to understand the potential costs and benefits of the different options before locking in.”

PwC chief pensions actuary, Alison Fleming, said that this also mirrors the requirement from 1 April for the actuarial profession to advise their clients on the credible alternatives to particular end-game options.

“Pension schemes and their sponsors need to understand the benefits, cost and risks of each option as well as practical issues like timing and ease of implementation," she added.

"This new requirement helps to reinforce existing actuarial standards, ensuring clients receive high quality advice in this complex area.”

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