As you will have come to expect from our Chart your own course annual reports, the scheme’s future journey is at the core and this year is no different. Our six point journey blueprint, as set out in previous reports, still remains key to a successful journey. In particular:


Determine your long-term funding target

Consider if long-term run off, insured buy-out or something else is the right destination for you.


Manage your risks

Explore our Covid-19 recovery and climate change scenarios, consider what our integrated approach to risk modelling, LCP Triangulate, can do for you and see a preview of our updated risk profiling tool, LCP Sonar.


A robust understanding of your covenant should frame all decisions

Find out more about covenant monitoring, contingency planning and the implications of covenant longevity, all set in the landscape of the Pensions Schemes Act 2021.


Develop an intelligent investment strategy

See how you stack up against our investment strategy check-in.


Fund your liabilities

We have focused on key topical issues, including GMP equalisation, tackling longevity risk, member options, liability management and IFA advice and how you may approach the final phase of your journey.


Focus on good governance

Review what the Pensions Regulator's new single code of practice might mean for you, read our top tips for "business different", and make sure you're ready for the Pensions Schemes Act 2021.

And, as many schemes have found in practice over the last year, it is important to keep this plan live and dynamically adjust it as circumstances can and do change.


The economic fall-out of Covid-19 meant a roller coaster for many schemes with the impact being very scheme specific depending crucially on:

  • how each was invested;
  • how hedged each was against changes in interest rates and inflation; and
  • the impact on the covenant.

The chart below shows how the funding level has changed over 18 months for two LCP schemes with very different investment strategies. These two schemes have ended up in a similar position as at 30 June 2021, however the path to get there was very different. For many, the last few months of equity market and interest rate rises have combined to mean the scheme is now in a better position than before.

Since 30 June 2021 to end July 2021 gilt yields fell and inflation expectations rose, meaning that those schemes that are less than 100% hedged may have seen a deterioration in funding position.

Contrasting experience for two schemes over 18 months to 30 June 2021

Whilst the average LCP scheme may have seen a c2.5% improvement ignoring contributions, there was a wide range of outcomes as shown in the chart below. As at 30 June 2021 less than 20% of our schemes had seen a worsening, with over 50% having seen an improvement of 2.5% or better. The position is materially better compared to the 6 months to 30 June 2020 where c50% of schemes of schemes had seen a worsening of 2.5% or more, with less than 15% of schemes having seen an improvement.

In the year to 30 June 2021, we saw the average gilts flat funding level of LCP Sonar schemes increase from 79% to 87%. Around 2% of this was due to the £5bn of recovery plan payments with much of the rest due to financial performance. For many schemes this offset the negative performance in the first half of 2020.
Our data shows that the typical scheme is around 5% ahead in funding level terms compared to pre-Covid levels.

Change in Technical Provisions funding excluding contributions in the 18 months to 30 June 2021

This chart shows the change in Technical Provisions compared to pre-Covid levels and highlights the range of experience seen by schemes.

Our survey also showed a similarly mixed experience in other areas – as highlighted in our introduction - although with a large proportion finding the pandemic has had no impact on various key areas. This might be testimony to the robust risk management controls they already had in place (or to the fact that, despite a rocky 2020, they have found themselves in a much similar position to pre-pandemic).


As you would expect for a range of schemes in different circumstances, we see a range of priorities. We encourage our schemes to prioritise matters that are key for them at the current time and allocate their resources accordingly. It is also key to have a clear long-term funding objective and a plan to get there, and to frame all decisions accordingly in the context of this strategy.

There are a tremendous number of issues that DB trustees are currently grappling with – as highlighted in the wide range of possible priorities below – and many of our survey respondents are finding the current pensions landscape challenging.

What are your top priorities for the next 12 months?

In a maximum of two words how would you describe the current pension scheme regulatory environment?

It is clear from the words used above, that people are finding the current landscape and its challenges rather overwhelming.

In this year’s report, we focus first on navigating the journey and how to best address some of the key areas our trustees and sponsors are grappling with.

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