A quarter of schemes may see no improvement in deficits in 20 years because many are still not integrating long-term covenant risk, according to research.
In a new report, Hymans Robertson warned only one in three defined benefit (DB) schemes would reach buyout funding by 2036.
The findings are based on its first UK DB index, powered by 3D analytics, which provides real-time updates to the funding positions of all 6,000 private sector DB schemes.
It is concerned that many schemes are still taking significant risk by not taking a fully integrated approach to risk management, which includes investment, covenant risk and contributionsand is advocated by The Pensions Regulator.
The firm's survey of independent trustees earlier this year found 43% were not integrating long-term covenant risk, but Hymans believes the figure is much higher in reality.
It said the number of schemes reaching buyout by 2036 could increase by 50% to one in two if they adopt a fully integrated approach that incorporates sponsor default risk. This would mean being able to avoid making further cash calls on sponsors now and in the future, according to the report.
Having a fully integrated strategy also decreases the chance of a scheme not seeing an improvement in deficit in 20 years' time from one in four to just one in 12.
Head of trustee consulting Calum Cooper said:"For too long now schemes have tried to view an increasingly complex web of investment, funding and strategy decisions through the narrow filter of deficits and discount rates. While this is a good starting point for schemes to calculate how far they will need to travel in order to secure their member's benefits, more is needed to provide better outcomes for pensioners."
He said a strategy guided by deficits and discount rates can hinder a scheme's ability to accurately measure chances of success.
"Equities today are half the level predicted back in 2000 while the fall in interest rates has led to a 50% increase in liabilities. These factors, alongside increasing longevity have led to a quadrupling of deficits in the last 15 years to a record £1trn."
The report also pointed out that many companies are facing a cash flow challenge because corporate earnings are lagging behind dividend payments. Therefore, it said the need for schemes to reduce exposure to growth orientated assets such as equities becomes "ever more attractive and important".
Cooper added: "Schemes need clarity now, more than ever, to help them to take informed action and to develop greater resilience to risk. If they don't, it's reasonable to expect 25% of schemes will see absolutely no improvement in their deficit in 20 years' time, by which time they will have paid in a further £100bn or more in contributions to schemes."
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