For an easily distracted reader like me, I welcomed this year’s shorter and snappier tPR annual funding statement! It reflects the good news that many schemes have seen material improvements in their funding levels and essentially poses the question “Now what”?
Helpfully, the statement (as with last year) breaks schemes into three broad categories:
- Funding level at/above buyout
- Funding level above technical provisions but below buyout
- Funding level below technical provisions
Strategies for diverse financial situations
For the poorest funded schemes, the message is clear – get fully funded on your technical provisions basis as soon as you can and reduce risk while you are at it.
For those approaching buyout, timescales for hitting your long-term target should be reviewed and accelerated where possible. The range of funding paths are outlined, and recognition is given to emerging options (consolidators, capital-backed journey plans, public sector consolidator via the PPF). It was good to see that “wait and see” was recognised as a viable option as the landscape is evolving and the right path for you may not be available just yet.
The main options for the best funded schemes are primarily to either buy-out now or run-on. Where schemes are pursuing the latter, it was interesting that tPR indicated that “trustees should ensure that it [run-on] is a better option for members”. I read this as a caution against running on and slight favouring of buyout as the “default”. While I am sure for smaller schemes this will be the case, I hope that recent innovation and new options continue to develop and flourish over the coming years.
Closing thoughts...
A final take-away for me was the confirmation that schemes should act now to align strategies with the new DB funding regime – albeit tPR is only expecting to publish its final DB funding code this summer. This will certainly be on agendas for all upcoming trustee meetings.
TPR Annual Funding Statement 2024 PDF
