The proportion of defined benefit (DB) schemes that are fully funded has reached its highest level since the current funding regime began in 2005, with the majority having set a long-term objective to run on, according to Aon.

Aon’s latest pension scheme funding analysis found that 74 per cent of schemes in its tranche 24/25 analysis were fully funded on a technical provisions basis, with the average funding level standing at 104 per cent.

This marked a significant improvement over the typical three-year valuation cycle, with the average funding level rising from 97 per cent in tranche 17 to 104 per cent in tranche 24/25, while the proportion of schemes fully funded increased from 44 per cent to 74 per cent.

The analysis covered 80 completed valuations carried out by Aon consultants, including valuations with effective dates from September 2024 to May 2025, and represents the first tranche of valuations carried out under the new DB funding regime.

Under the new regime, schemes are required to set a long-term objective and aim to reach a state of low dependency on their sponsoring employer by the time they become significantly mature.

Aon found that 61 per cent of schemes had set a long-term objective based on running on, with risks minimised for most, while the remaining 39 per cent aimed to achieve full funding on a buyout basis, although most had not committed to ultimately buying out.

However, Aon noted that these stated objectives presented a different picture from its 2026 UK DB Scheme Endgame Survey, which found that, among schemes that had reached a view on their long-term strategy, 74 per cent intended to insure once affordable or settlement-ready and 24 per cent intended to run on beyond the point needed for settlement readiness.

The consultancy suggested that this could indicate that some schemes are using their formal long-term objectives to retain flexibility rather than to reflect their ultimate endgame strategy.

The analysis also revealed that 75 per cent of schemes were required to have a journey plan, while 48 per cent were more than 10 years from their relevant date.

For schemes that did not require a journey plan, 90 per cent had set their relevant date before their expected date of significant maturity.

Meanwhile, 74 per cent of schemes set their low-dependency funding target at 100 per cent of liabilities on a low-dependency funding basis, with the remaining 26 per cent targeting a higher level.

The improving funding picture also meant fewer schemes needed recovery plans, with just 26 per cent of tranche 24/25 valuations requiring one, compared with 56 per cent in tranche 17.

For those schemes still in deficit, the average recovery period was 4.3 years, down slightly from 4.5 years in tranche 19 but 0.2 years longer than the previous three years.

Aon said average recovery periods appeared to have stabilised after falling significantly over the longer term.

Looking ahead, the firm noted that average funding levels had continued to improve since the valuation dates covered by the analysis, although individual scheme experience varied.

Indeed, its Risk Analyser data showed that more than half of the schemes it monitors are now fully funded on a buyout basis, with the proportion gradually increasing in recent years.

Aon added that many schemes had substantially de-risked to lock in previous asset gains and were now close to meeting the cost of buyout.

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