Pensions Regulator publishes analysis underpinning annual funding statement 2023

In analysis underpinning its annual funding statement published on April 27, 2023, the Regulator notes that most schemes are likely to have improved their funding levels. This year's funding statement covered DB schemes with valuation dates between September 22, 2022, and September 21, 2023 (known as Tranche 18 or T18 schemes). Within the T18 category, the Regulator found that most schemes have specific valuation dates of either December 31, 2022, or March 31, 2023.

The analysis shows that the major asset classes invested in by DB pension funds experienced a wide variety of returns over the three years to December 31, 2022, or March 31, 2023. Improvements to funding levels have chiefly arisen through a combination of investment out-performance from return-seeking assets and a significant rise in gilt yields, with the majority now being in surplus. That said, the position for individual schemes is likely to vary greatly. It will depend on factors including developments since their previous valuation, exact valuation dates, mortality assumptions, choice of discount rate and investment strategies. Among other things, some schemes may have experienced adverse outcomes from the LDI crisis in autumn 2022.

Further details about the limitations of the analysis are contained in the section Methods, principal assumptions and limitations. The Regulator highlights that in undertaking its analysis it relies solely on information provided in scheme returns, which may not be fully up to date and may not encompass the full range of information available to scheme actuaries. It follows that the assumptions made in undertaking the analysis may be a source of significant differences with formal valuation results in individual schemes.