Recent developments in defined benefit (DB) pension scheme funding have heightened the need for schemes to have an up-to-the-minute picture of their scheme funding position rather than rely too heavily on a potentially out-of-date triennial valuation, LCP has claimed.

The comments were made after a recent Chart Your Own Course survey undertaken by LCP earlier this year in which respondents noted the extent to which the three-yearly valuation process can dominate a scheme’s time and attention for long periods of time.

Yet, according to LCP partner, Michelle Wright, the three-yearly valuation is of diminishing value for many schemes, in a fast-changing world where many industries rely on “real-time” data to understand what is happening in their markets and as the “technical provisions” funding measure becomes less relevant.

LCP detailed that, because of the length of time taken to complete and sign-off a triennial valuation, some pension schemes are currently working with a valuation which reflects market conditions and membership data up to four years ago.

Some reasons given by LCP as to why historic triennial valuations are inadequate on their own as a tool for scheme management included recent “exceptional” political and economic turmoil, movements in interest rates, and recent turmoil around liability driven investments (LDI).

In light of this, Wright called on all schemes to review whether they need to do more to have a “real-time” picture of their scheme’s assets and liabilities, including more up-to-the-minute membership data and assets feeds as a matter of course.

Commenting, Wright said: “For many years, managing a DB pension scheme involved having a perspective running decades into the future, and a regular three-yearly check-in was probably sufficient.

“But a combination of extraordinary political and economic turbulence and the greater proximity to the end game means that DB schemes now need much more ‘real-time’ data to make sure they can make the most of the opportunities which are now available.

“In many other industries it is taken as read that there is up-to-the-minute monitoring of consumer behaviour and market trends, yet in some parts of the pension landscape a valuation document which can be three or more years out of date remains a key reference point.

“It is time for the DB world to harness the latest technology and tools to make sure that trustees have the information that they need at their finger-tips to ensure that they can deliver the best possible outcomes for members”.

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