On April 5, 2018, the Pensions Regulator (TPR) published its latest annual funding statement. The statement is aimed at trustees and sponsoring employers of defined benefit (DB) schemes with valuation dates between September 22, 2017, and September 21, 2018 (referred to by TPR as tranche 13 schemes). However, given its wide implications, the statement is relevant to all DB schemes, and its contents should be noted particularly where schemes face significant changes and, as a consequence, require reviews of their funding and risk strategies.
While TPR’s analysis suggests marginally improved funding levels for tranche 13 schemes compared to three years ago at the time of their last valuations, hedged schemes will generally have fared better. The statement flags concerns about what TPR describes as the growing disparity between dividend growth and stable deficit reduction contributions (DRCs).
The statement should be read in conjunction with TPR’s code of practice on scheme funding, which will be updated “over the next two years” and which, according to the recent White Paper on DB scheme sustainability, may become mandatory.
This briefing looks at the key messages from TPR in the 2018 statement, compares them with some of the themes in TPR’s earlier statements, and suggests some key actions for trustees and employers engaged in or approaching a valuation.