FTSE 250 firms urged to develop strategies to help schemes recover from Covid-19 impact

Companies in the FTSE 250 have been encouraged to take control of strategy and capitalise on opportunities in 2021 to help their pension schemes recover from the funding level decline in 2020.

Aon’s Accounting Strategy 2021 report noted that the aggregate funding position of FTSE 250 firms’ schemes fell from 97 per cent to 86 per cent last year, and there has been “little signs of recovery since”.

“Many schemes’ funding positions have worsened due to falling yields, but some have been bolstered by strong equity performance, particularly US equities,” it stated.

Aon added that the “worrying trend” seen in recent years of the best funded schemes being least affected and the worst funded schemes being the most affected had continued.

This was attributed to the better funded schemes being able to afford implementing higher levels of protection from the falls in yields, while schemes with lower levels of protection experienced greater volatility.

Despite the government’s roadmap creating “optimism and potential” for market recovery, Aon warned that 2021 would continue to be a challenge for pension schemes and encouraged FTSE 250 companies to understand how their schemes shape up and to develop a strategy for their recovery.

“The best way to begin understanding how your scheme is performing is to compare your scheme to its peer group,” the report stated.

“That may be companies or pension schemes of similar size, or your direct competitors. You can then get to grips with what is driving the differences in performance."

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