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Looking ahead to 2022

07 February, 2022

Anthony Rushworth

Director, London, PwC United Kingdom

+44 (0)7808 035512


2021 was a significant year for the UK Defined Benefit (DB) pensions market. The Pensions Scheme Act 2021 received royal assent and a number of provisions came into force; the Government brought in new climate-related governance and reporting requirements for the largest schemes; and the Pensions Regulator completed its assessment of the first DB Superfund Consolidator. At the same time, pension scheme trustees and their sponsoring employers sought to manage their schemes through a recovery from the COVID-19 pandemic. So as we look ahead to 2022, what’s next for UK DB pensions?

Economic outlook for 2022

PwC economists expect UK GDP growth to remain strong in 2022, at around 4.5-5.1%, driven by a relatively weak comparable period in early 2021.

Core underlying growth is expected to be relatively modest and there is likely to be polarisation between different sectors. For example, the hospitality sector is projected to continue to grow in a fully opened economy, while other sectors, such as construction and manufacturing, will be negatively impacted by rising costs, workforce shortages, supply bottlenecks, and weakening demand and business confidence.

It is important for pension scheme trustees to consider the impact of these economic risks on the covenant strength and affordability of their individual scheme. See PwC’s UK Economic Outlook (December 2021) for more information.

Pension Regulations

In October 2021 key provisions of the Pensions Scheme Act 2021 (PSA2021) came into effect. This included new criminal offences and increased powers for the Pensions Regulator, such as new contribution notice powers and information gathering powers. Following PSA2021 and against the backdrop of a record breaking global M&A market in 2021 (M&A deals of over $5tn), we experienced greater engagement with sponsors at an earlier stage, who were keen to understand the impact of potential transactions on their pension schemes. I expect this trend to continue, particularly following the implementation of the Pension Regulator’s extended notifiable events regime in April 2022. See more information on PSA2021.

The Regulator (TPR) announced in December that the second consultation on its draft DB Funding Code has been pushed back to the “late summer of 2022”. TPR explained that it wanted to learn from the DWP consultation on the draft funding and investment regulations, due in Spring 2022. Although the new Code is unlikely to come into force until 2023, I anticipate the draft Code published in the second consultation is likely to have an immediate influence on Trustee and Sponsor behaviour, as we saw with the principles set out in the first consultation in 2020.

Climate risk

From October 2021 new climate-related governance requirements will apply for the largest occupational pensions schemes (those with more than £5bn worth of assets) and authorised master trusts (schemes with assets worth less than £1bn from October 2022). These schemes are also required to prepare a climate change report in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and many of the schemes will be preparing this report for the first time in 2022.

Given the importance of the employer covenant to many schemes, I expect that developing an understanding of the potential impact of climate-related risks (and any planned mitigating actions) and opportunities on the covenant, over the short, medium and long term and under different scenarios, will be a significant area of focus for trustees in 2022. See more information on climate risk rules for pension schemes.


In November 2021, the Pensions Regulator completed its assessment of the first DB Superfund Consolidator (Superfund), Clara Pensions. As a result, the first transactions - involving the transfer of a UK defined benefit pension scheme to a Superfund - are expected in 2022.

Superfunds will not be appropriate for all DB pension schemes, but for some transferring to a Superfund will improve member security by replacing a weak employer covenant with a capital buffer that is subject to TPR’s capital adequacy requirements. Sponsors can also benefit by removing any future obligation to fund pension liabilities for a cost that could be 10% less than the cost of an insurance buyout. The Pensions Regulator has set out guidance for Trustees and Employers considering transferring to a Superfund (see PwC’s summary of this guidance).

If you have any comments or questions about the contents of this blog please get in touch or see our Pensions website for further information.

Anthony Rushworth

Director, London, PwC United Kingdom

+44 (0)7808 035512


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