UK: DB funding valuations in 2019
The UK Pensions Regulator has noted it will be taking a more proactive approach to monitoring plan funding and is ready to use its powers to ensure members’ benefit expectations are delivered to as it addresses its annual funding statement to both trustees and sponsoring employers of defined benefit (DB) pension plans.
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.
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
VIEW PROFILE
Email:
jane.ralph@barnett-waddingham.co.uk
Tel: 0333 11 11 222
Jane Ralph
Principal and Head of Corporate Consulting Midlands, Barnett Waddingham
Jane is a qualified actuary who advises organisations on a wide range of pension issues, primarily related to their legacy defined benefit pension plans.
Jane’s approach is to first understand the objectives of the key stakeholders; then provide clear, considered, complete and concise advice; and finally, to deliver the most appropriate solution in the most efficient way.
In more than 25 years in the pensions industry, she has advised the full spectrum of clients from listed global multinationals to small, family-owned businesses with assets ranging from £3 billion to £20 million. She has advised companies on benefit design changes, scheme merger and harmonisation, liability management, scheme funding negotiations, longevity transactions, M&A activity and accounting disclosures. In addition, Jane historically advised trustees and therefore has a good understanding of the approach trustees and their advisers might adopt.
Jane’s extensive experience, clear advice and proactive approach has helped her to become a trusted consultant to a wide range of UK and multinational businesses.
Contacts
Jane Ralph
Principal and Head of Corporate Consulting Midlands, Barnett Waddingham
VIEW PROFILE
Email:
jane.ralph@barnett-waddingham.co.uk
Tel: 0333 11 11 222
Jane Ralph
Principal and Head of Corporate Consulting Midlands, Barnett Waddingham
Jane is a qualified actuary who advises organisations on a wide range of pension issues, primarily related to their legacy defined benefit pension plans.
Jane’s approach is to first understand the objectives of the key stakeholders; then provide clear, considered, complete and concise advice; and finally, to deliver the most appropriate solution in the most efficient way.
In more than 25 years in the pensions industry, she has advised the full spectrum of clients from listed global multinationals to small, family-owned businesses with assets ranging from £3 billion to £20 million. She has advised companies on benefit design changes, scheme merger and harmonisation, liability management, scheme funding negotiations, longevity transactions, M&A activity and accounting disclosures. In addition, Jane historically advised trustees and therefore has a good understanding of the approach trustees and their advisers might adopt.
Jane’s extensive experience, clear advice and proactive approach has helped her to become a trusted consultant to a wide range of UK and multinational businesses.