DB schemes should guard against post-pandemic inertia

Three-quarters of defined benefit schemes said that they have taken no material action to change their investment strategy or journey plans in the wake of the Covid-19 pandemic, according to research by LCP.

While for some, this may be reflective of their robust planning, inertia may be damaging for others, the consultancy said.

While around 40% of those surveyed felt that both their funding and covenant positions were holding up, the remainder have seen either funding or covenant deteriorate, or both worsen.

Forty per cent of schemes also thought they would have some contingent funding in assets, cash or credits in place for their next valuation.

Jill Ampleford, LPC partner and author of the Chart Your Own Course report said: “Since the regulator set the direction of travel towards long-term journey planning back in March, schemes have had to navigate unexpected choppy waters as a result of Covid-19.”

“We don’t know what the true economic fallout of the pandemic will be, so it’s understandable that schemes may want to simply batten down the hatches,” she added. “However, schemes need to guard against inertia and instead make sure they have a robust journey plan.”