Emerging Trends in DB Pensions Survey 2020

A lot is changing in the world of defined benefit (DB) pensions. COVID-19 and the consequences for the wider economy are placing sponsors and schemes under strain. The Pensions Regulator has promised a “clearer, quicker, tougher” approach for scheme funding. Meanwhile, new consolidation vehicles have been launched, and schemes continue to grapple with ‘Guaranteed Minimum Pensions (GMP) equalisation’.

Our Willis Towers Watson Emerging Trends in Defined Benefit 2020 Survey explores how employers and trustees view the emerging issues affecting defined benefit pension schemes. The survey provides insights on how pension schemes are dealing with current challenges and their expectations for the future of DB pension schemes. Here are the key highlights from our findings:

• Despite the economic difficulties associated with the Coronavirus pandemic, ‘GMP equalisation’ is the top priority for schemes in the next 12 months.
• 1 in 3 say the sponsor’s ability to support the scheme has weakened in the short term; 1 in 6 say it has in the long term.
• Nearly half of sponsors with ongoing DB accrual expect either to close the scheme or reduce its generosity within the next 3 years.
• There is a trade-off between scheme security and business recovery: Trustees aim to shorten the time to meet schemes’ long term targets, while corporates expect to extend it.
• In the next 3 years, 4 in 10 schemes are looking to complete a bulk annuity transaction or longevity swap.
• More professional trustees and schemes outsourcing more of their functions are expected to be the key trends in the governance of DB schemes.
• Three quarters of respondents believe that Independent Trustees add value to the governance of their scheme.

In this report, we have focussed on the following four topics:

Table of Contents

1. 01

   Key trends facing DB schemes

   Despite the economic difficulties associated with the Coronavirus pandemic, ‘GMP equalisation’ is the top priority for schemes in the next 12 months.

   ---

2. 02

   Funding and the DB journey

   We explore scheme decision-makers’ views on what challenges the ongoing pandemic and its strain on the economy have presented to their scheme funding and journey plan.

   ---

3. 03

   'GMP equalisation'

   Schemes are seeking to address 'GMP equalisation' over the next 2-3 years. Almost three quarters seeking to complete back payments by 2022.

   ---

4. 04

   DB scheme governance

   In the next 3 years, more professional trustees and schemes outsourcing more of their functions are expected to be the key trends.

   ---