37% of Pension Schemes in Funding Surplus

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The FINANCIAL — Nearly two out of five pension schemes are now in surplus against their agreed funding target, according to Mercer’s 2018 Valuation Survey.

Although many trustees tend to focus on longer-term targets, Mercer’s survey highlights that 38% of pension schemes have not agreed a long-term target. Those that have agreed long-term investment strategies are split between those looking towards buy-in or buy-out and those looking towards cashflow-driven strategies.


The 2018 survey demonstrates how Integrated Risk Management (IRM) has become a key part of trustees’ decision-making processes. Three quarters of pension schemes are reviewing investment strategy alongside the valuation process; two in three schemes seek external covenant analysis and twice as many receive daily updates of their funding position compared to 2015.

The survey found that many pension schemes have changed their assumptions for life expectancy citing more up to date information as the reason why. Over half of schemes had carried out scheme specific analysis on life expectancy in the 2018 Valuation Survey compared to less than a third in 2015.

Finally, the survey highlighted the continued trend for schemes closing to accrual of future pension benefits. Two-thirds of schemes covered by the 2018 survey were closed to accrual. Three years ago, nearly half of schemes were still open to new benefit accrual.

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