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This is the first year the statement has been jointly addressed to sponsoring employers (who have a clear role in the UK to agree the approach to funding pension benefits). It is clear that the messages are designed to alert employers that the Regulator intends to step up its oversight and that it will engage with trustees and employers where it has “concerns on specific aspects of their funding or investment approach”.  In the UK trustees operate as a body distinct from the employer however they are required to agree the necessary contribution requirements to fund the defined benefits at least once every three years on a plan specific basis which must reflect the strength of the sponsor.

Whilst the 2019 annual funding statement is aimed at those whose effective valuation date falls between 22 September 2018 and 21 September 2019 the general messaging will have wider applicability. Specific areas highlighted are:

  • a journey plan to achieve a long term funding target,
  • the reliance on the sponsor for all but low risk investment strategies, and
  • the strength of employer covenant including encouraging trustees to challenge “covenant leakage” (value leaving the company in the form of dividends or inter-group payments for example) to secure a “fair deal” for the plan.
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Download Barnett Waddingham’s briefing paper to read more on the Pension Regulator’s annual funding statement and preparing for your DB plan funding discussions.

Contacts

Jane Ralph

Principal and Head of Corporate Consulting Midlands, Barnett Waddingham

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Contacts

Jane Ralph

Principal and Head of Corporate Consulting Midlands, Barnett Waddingham

VIEW PROFILE