This week in pensions: 12-16 September

With the nation in mourning following the death of Queen Elizabeth II, this week was an understandably quiet one for the pensions industry. Governmental work halted, the publication of reports was postponed, and the pension engagement campaigns that were scheduled for this week were paused.

Activities for the highly anticipated Pension Attention campaign, launched by the Pensions and Lifetime Savings Association (PLSA) and Association of British Insurers (ABI) last week, that were due to run this week were postponed as a mark of respect for the Queen.

Alongside this, the activities and live shows for Pension Awareness Week, which is run by Pension Geeks, were put on hold. Pension Awareness Day typically takes place on 15 September, but this was also postponed. The week of events will now take place from 31 October to 4 November 2022.

Defined benefit (DB) pension scheme funding levels showed continued improvement, with the latest Pension Protection Fund (PPF) 7800 Index being published this week. It revealed that the aggregate surplus for DB schemes in the UK had risen to £313.8bn at the end of August. DB scheme funding levels have shown remarkable improvements following the impact of the Covid-19 pandemic two years ago, with the deficit reaching as high as £199.5bn at the end of July 2020. This represents an improvement of more than half a trillion pounds in just over two years.

Sticking with DB pensions, the pension risk transfer market was found to be a busy one in the first half of the year. Analysis from LCP showed that £12bn worth of buy-ins and buyouts were completed in H1 2022, the third largest H1 on record. Smaller deals made up the majority of the transactions, with 67 per cent of deals being sub-£100m.

Following concerns over its DB schemes after it fell into administration in 2019, the deficits of Mothercare’s schemes fell to £60m, as at 30 June 2022, it was revealed this week. These improved funding levels also resulted in a further reduction in deficit recovery contributions.

Despite these positives in the DB world, the cost-of-living crisis is of huge concern for millions around the country. The latest Office for National Statistics data on inflation was published this week, with the Consumer Price Index falling slightly from 10.1 per cent to 9.9 per cent. Despite the slight decrease, industry experts warned that inflation was unlikely to have peaked and cited concerns that a prolonged period of high inflation would compound the effects of pensions not keeping pace with price rises.

The cost-of-living crisis is not the only crisis the country and wider world is navigating, with the climate crisis ever-more apparent amid flooding in Pakistan and a record-breaking summer in the UK.

In light of this, the Institutional Investors Group on Climate Change (IIGCC) has called for input on the development of its Climate Resilience Investment Framework. The framework seeks to address risks on assets and portfolios, as well as systemic risks. The five areas outlined in the proposed framework are underpinned by steps that investors can take now to support climate resilience objectives.

Following the Queen’s funeral next week, activity in the pensions industry is likely to pick up significantly, with preparations for new climate change and governance reporting requirements that are coming into force from 1 October and The Pensions Regulator’s updated Single Code of Practice likely high on schemes’ priority lists.

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