A majority (70%) of UK chief financial officers (CFOs) are uncertain about the ultimate objective of their defined benefit (DB) pension schemes, according to data.
The report by Cardano, an investment management and advisory firm, noted that among this group, 51% are seeking external advice for their scheme’s endgame, while 19% are not.
227 UK CFOs and senior executives responsible for their company’s DB schemes participated in the research.
72% of CFOs described their DB pension scheme in “good financial health”. Within this group, 56% stated their scheme is above its long-term funding target and 16% are close to, or in, a buyout surplus.
Despite stronger funding positions, 89% of CFOs expressed uncertainty about the possibility of accessing a future pension surplus. Of this group, 51% said they were “entirely unsure” about how a surplus might affect their scheme’s future objectives. This uncertainty was consistent among CFOs overseeing small, medium and large schemes.
One year on from the market turbulence of Autumn 2022, CFOs of small schemes said they were particularly “badly hit”. 61% of CFOs of small schemes reported an adverse impact on the funding of their scheme at the time owing to the “loss of hedges at the wrong time”.
In contrast, 56% of all CFOs said the crisis had delivered a positive impact on funding at the time. Larger schemes expressed a more favourable view of the crisis’s impact on liquidity.
According to the report’s findings, CFOs of well-funded large schemes are favouring buyouts, with 56% fast-tracking plans. Among larger schemes, 33% are de-risking their investment strategy to secure funding gains, while 7% are in a run-off phase.
In contrast, 50% of smaller, well-funded schemes said they would continue their run-off strategy, with 19% opting for de-risking to secure funding gains and 8% accelerating toward a buyout.
The findings also revealed CFO concerns about their limited influence on scheme funding and investment strategies. On a scale of one to five, the average CFO’s influence rating was 2.76. The report revealed that despite varying degrees, CFOs of small, medium, and large schemes all share the common desire for “greater influence than they currently possess”.
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