Fragmentation causes value loss in DB schemes, finds Brightwell

Brightwell has released a report on the future of defined benefit (DB) pensions, which found fragmentation in the sector is causing duplicated costs and value leakage.

Most UK DB schemes have closed to new members, but the sector is expected to remain significant, according to its ‘DB 2036: Out of the Woods’ report.

The Pension Protection Fund (PPF) projects there will still be £880bn in assets under management (AUM) in DB schemes by 2036.

Value leakage was a major concern raised in the report, with schemes looking to cut duplicated costs and keep outcomes stable for members and sponsors. 

Protecting and delivering members’ benefits remains a priority, with trustees and sponsors focused on secure pension payments and adapting the member experience for an ageing population.

Large, well-funded schemes are now choosing to run on rather than buy out, aiming to retain control and value for both members and sponsors. 

Administration and operational resilience are under strain, with issues including legacy systems, skills shortages, cyber risks and increased regulatory workload.

Leaders in the sector have developed a risk-aware culture and are open to reform, but say clearer guidance is needed.