Just over a third (35 per cent) of defined benefit (DB) pension schemes are likely to meet the fast track parameters in The Pensions Regulator’s (TPR) forthcoming DB Funding Code, according to Hymans Robertson.

The consultancy’s latest benchmarking analysis suggested that DB schemes’ funding levels have been “relatively unscathed” after the volatility seen at the beginning of the Covid-19 pandemic.

However, the firm warned that challenges still remained, with 46 per cent of DB trustees expecting to experience intervention from the regulator before their next valuation.

“TPR’s latest scheme funding analysis highlights the good progress many schemes are making but the outlook remains uncertain,” commented Hymans Robertson partner, Laura McLaren.

“With markets managing to recover strongly after last year’s initial disruption pension schemes, on the whole, are emerging in a good position however for some there are likely to be longer lasting implications on sponsor covenant and affordability.

“TPR’s analysis provides schemes with a good opportunity to benchmark their current funding plans. Indeed, with the DB funding regime under review, this data offers valuable insight into where TPR might ultimately set the parameters within the framework when they publish the draft code at the end of this year.

“Even well-funded schemes will need to be able to demonstrate that they have clear, robust plans in place.”

When asked about TPR’s forthcoming second consultation on the DB Funding Code, 44 per cent of trustees said they would like more flexible fast track parameters and 41 per cent felt that transitional arrangements would be beneficial.

Furthermore, 43 per cent wanted greater flexibility from the bespoke route and 41 per cent wanted barriers to ‘levelling down’ existing funding plans.

“With the ongoing fallout from Covid-19, Brexit and numerous regulatory changes, the next round of recovery plans may highlight a more dispersed picture across schemes with sponsor covenant and affordability looking set to have the largest impacts,” McLaren added.

“Further out, more regulatory change is coming with fast track compliance having the potential to impact funding plans and push up cash requirements.”

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