Half of medium-sized defined benefit (DB) schemes and almost two-thirds (64 per cent) of very large schemes are yet to set their long-term funding targets, according to research from Barnett Waddingham (BW).

The firm’s The Retirement Runway research, based on a survey of 50 professional trustees of DB schemes, found that progress on setting long-term funding targets varied significantly by scheme size.

Almost two-thirds (63 per cent) of small schemes had already set a long-term funding target, compared with 50 per cent of medium-sized schemes, 46 per cent of large schemes and 36 per cent of very large schemes.

BW noted that many of those without targets expected to set them over the next 12 to 24 months.

Among trustees managing medium-sized schemes, 44 per cent said most of those schemes had not yet set a long-term funding target but expected to do so within the next 12 months.

For large schemes, 32 per cent of trustees expected most schemes to set a target within 12 months, while a further 22 per cent expected this to happen within 13 to 24 months.

Meanwhile, 45 per cent of trustees managing very large schemes expected most of those schemes to set a target within the next year.

BW noted that the findings came as improved funding levels and continued market innovation gave trustees a broader range of endgame options, including buyout, run-on, and consolidation.

The research also found that trustees expected schemes to take several years to achieve their eventual endgame objectives.

Average expected timeframes ranged from 5.8 years for small schemes to 9.3 years for large schemes, while 51 per cent of large schemes expected it to take between 10 and 15 years to reach their objectives.

Barnett Waddingham partner and head of DB endgame strategy, Ian Mills, commented: “DB trustees now have a much wider range of endgame options than they did just a year ago.

“Where buyout was once the default for schemes of all sizes, the market is becoming far more varied, particularly in the wake of the Pension Schemes Act.”

Mills argued that the high proportion of schemes yet to formalise their long-term funding targets reflected a market “in transition”, with trustees reassessing strategy as new options emerged.

“Many are now deferring longstanding plans to buy out as soon as affordable and considering running on beyond full buyout funding, while alternatives such as DB superfunds are becoming more viable alternatives,” he continued.

“Generally speaking, the larger the scheme, the more options are available, so it’s not surprising that smaller schemes are seemingly ahead in finalising their plans.”

Mills added that trustees would need to weigh factors including scheme size, maturity, sponsor strength and member needs when deciding on their long-term strategy.

“These decisions cannot be rushed, but the sooner a clear funding target and endgame objective is set, the sooner trustees and sponsors can move forward with confidence,” he concluded.

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