Latest valuation shows improved funding position

The 2016 valuation has now been completed. It shows an improvement in the funding position since 2013, when the Scheme’s last full valuation was carried out, which is good news all round in the current environment.

The Scheme’s funding level as at 1 April 2016 was calculated to be 98%, compared with 94% three years earlier. The value of all the Scheme’s pensions (the liabilities) increased by £773 million over the three-year period between valuations, but its assets grew by almost one billion pounds – hence the improvement in the funding level.

Action plan
The Trustees and Company have agreed a plan to deal with the shortfall. The Company has agreed to pay the following contributions:

• £13.7 million due on or before 31 March 2017
• £4.875 million due on or before 30 April 2017
• £5.66 million due on or before 21 August 2017
• £19.5 million on or before 30 April 2018

These payments, along with projected income from investment returns, are expected to remove the shortfall by 31 March 2023. The next full valuation of the Scheme is due at 1 April 2019, when the position will be reviewed.

Solvency position
The Actuary is also required to provide a figure based on the ‘solvency’ position, which assumes that the Scheme is closed completely and transfers all the assets to an insurance company to pay benefits.

We are legally required to show this – it does not mean the Company has any plans to end the Scheme. Note it is a ‘worst-case scenario’, and the Trustees regularly monitor both the Company covenant (its ability to make good any shortfall) and the funding position (annually, and more formally at each triennial valuation).

At the 1 April 2013, the solvency funding target was £8,133 million, giving a solvency funding level of 66%. By 1 April 2016, the target had risen to £10,254 million and the funding level had reduced to 62%.

We’ll send more details on this later in the year when we send the annual newsletter with details of the Scheme’s Report and Accounts.