The Pension Regulator has published some updated numbers on the aggregate numbers of DB and hybrid (DB/DC) schemes in the UK.
These are updated numbers from those from the PPF’s purple book and no doubt will keep Keating and Clacher busy as they try to understand the differences in the TPR/PPF stats and those of the ONS. I suspect there will continue to be some confusion, which matters, if these numbers are what policy and regulation are being decided upon. We have still to see the latest version of the DB funding code which is expected around April.
The key findings (for TPR) from their work are that
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As with previous years, the DB and hybrid landscape continues to shrink at a consistent rate. Since 2022 the total number of schemes has reduced by 2% from 5,378 to 5,297. For schemes within the landscape, the percentage closed to future accrual (excluding those in wind-up) has risen from 70% to 72%.
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Scheme funding levels have improved since 2022, with the number of schemes with 100% or greater technical provisions funding levels increased from 2,565 to 3,620. The total deficit (of schemes in deficit) has more than halved, reducing from £63.610 billion to £27.673 billion.
Although there have been radical changes in the notional scheme funding positions, the behaviour of employers and trustees has changed very little
The inexorability of closure?
Given there is a changed landscape for DB funding resulting from interest rates staying higher for longer, one would hope that the trend to close for new members (CTNM) might be arrested and that we see fewer schemes closing for future accrual.
There is no definitive reason to close a DB scheme. It is a discretionary decision agreed on by trustee and sponsor. The same can be said for wind-up.
We should continue to challenge the notion that we are in an end-game. The darkest hour is just before dawn and while DB schemes may have to change from the single sponsor model, there are alternatives to the inexorability of closure.
Read the paper more closely and you will see that some 91% of ‘closures’ come from a stroke of TPR’s pen.
The 2% increase in closed accrual schemes when adjusted for the reduction in schemes over the year suggests c 50 schemes closed for accrual for the first time during the year, which represents less than 1% of schemes at the start of the year.
This is not such a large number as the TPR key finding highlights, and hopefully with the “notional” appearance of improved funding, TPR will be putting less pressure on Trustees and Sponsors during 2024. However, we have yet to see if DWP and TPR claims that they have listened to all the criticisms of the draft funding code. If they in reality have not, then it will lead to a speeding up of closures and wind ups. We will no doubt find out in due course…..by which time it may be too late.