Issues around long-term objectives and creating a journey plan are “dominating the thinking” of pension schemes after the Defined Benefit (DB) Funding Code was laid in parliament, according to Aon.

The consultancy polled pension professionals on which area of the funding code was likely to require most of their focus.

A combined 49 per cent stated that long-term objectives and forming a journey plan topped their agenda.

Meanwhile, covenant monitoring was cited as the top focus by 17 per cent of respondents, while 16 per cent pointed to low-dependency investment, and 15 per cent cited low-dependency funding basis.

Commenting on the findings, Aon partner and head of UK retirement policy, Matthew Arends, noted that schemes will be evaluating the detail of the code against their existing plans and procedures.

“The principles of this and the regulations being familiar to most well-run schemes,” he continued.

“However, the detailed requirements of the code don’t necessarily square with how any individual scheme is approaching these principles at the moment.

“It’s likely that when going through this process, areas of incompatibility will arise, and the polling results show that the areas that will need working on can arise across the whole range of scheme activity.”

Aon associate partner, Emma Moore, added: “One example is the requirement for the majority of schemes to introduce an expense reserve in the future, when often that isn’t now the case.

“That’s even in situations where, as a practical matter, the employer is paying expenses. This could lead to perverse consequences with employers becoming increasingly unwilling to continue paying scheme expenses due to the risk of paying for them twice.

“Given that expense reserves can range from 0.5 per cent of liabilities to as much as over 20 per cent, I can see this becoming quite a significant matter for negotiation between all parties and could lead to greater reliance on the scheme to cover expenses instead.”

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