Posts by John

John Wilson

John Wilson

John is Head of Technical, Research and Policy with over 33 years’ experience in employee benefits knowledge management
John Wilson

Pension scheme auditors and trustees face are facing additional scheme reporting challenges as a result of COVID-19. This has led to the publication of a new guide, applying to DB and DC pension schemes, from a joint working party.

Representatives from ICAS, ICAEW and PRAG have produced ‘Pension scheme reports and financial statements, and related matters in the context of the COVID-19 pandemic’. The guide can be downloaded at https://www.icas.com/__data/assets/pdf_file/0009/542574/27052020_Pension-scheme-reports,-financial-statements-and-audit-_FINAL.pdf.

The joint working party makes it clear from the outset of the guide that there are no changes to the requirements for preparing and auditing pension scheme financial statements. Annual reports and accounts for pension schemes still need to be produced within seven months of the scheme year end.

However, as ‘business as usual has been disrupted’ by the pandemic, they recommend that trustees and auditors check The Pension Regulator’s website regularly for any updates relating to pension scheme annual reports.

The guide also recommends that ‘in view of the COVID-19 pandemic, trustees need to consider whether the going concern basis remains appropriate’. And trustees should make allowances for additional complexities when producing reports, financial statements, and chair statements.

Auditors will need to consider the impact of COVID-19 on all aspects of the audit and discuss these with trustees, where appropriate. In particular, when compiling the statement about contributions, auditors will need to determine to what extent, if any, contributions to the scheme have been affected by:

  • the reduction or suspension of deficit recovery contributions or future contributions;
  • changes in pensionable earnings, and
  • the furloughing of employees.

Overall, the joint working party has produced useful guidance for trustees to take into account when discussing scheme reporting during COVID-19 with their auditors. Trustees should also consider what additional messages they might need to include on member communications, such as annual benefit statements.

John Wilson

Whilst the Pension Schemes Bill 2019/2020 does not appear to have progressed since its Committee Stage in the House of Lords on 4 March, there has been activity in the background that provides an indicative direction of travel for the Bill. This activity pre-dates the Covid-19 pandemic, but the current crisis is unlikely to change any of the following developments.

Payment of dividends versus Deficit Recovery Contributions

Despite calls to the contrary, the Government’s position is that it is not appropriate for the Bill to provide for The Pensions Regulator (TPR) to oversee or approve the payment of dividends. Provided the funding plan is meeting the scheme’s needs, it is envisaged that there is likely to be no need for TPR to intervene in the payment of dividends. Some good news for businesses as the ‘stay home’ message is replaced by ‘stay alert’.  

Central repository of SIPs

There is an initiative to develop a central index of statements of investment principles (SIPs). DWP and TPR have now identified a possible mechanism by which the web addresses where schemes SIPs and other documents are published could be collected and then published online. TPR’s scheme return is being explored as a collection mechanism.

The initiative could also be extended to Chair Statements and Implementation Statements. With the introduction of Statements of Strategy for DB schemes proposed in the Bill, it seems that, whatever the governance question is, the answer is a Statement!

TPR powers

In response to several questions and many concerns on the new penalties and sanctions under the Pension Schemes Bill, the government refuses to budge and still believes that the right balance has been struck between increased deterrents and protections for members, whilst minimising negative impacts on industry.

Dashboards

As expected, there will be a staged approach to ‘on boarding’. Nevertheless, the Bill ensures that regulations can capture all occupational and personal pension schemes, including legacy private pensions and private pensions not covered by the auto-enrolment requirements.

Dashboard providers will be brought within the FCA’s existing regulatory framework.

Transfer rights

As regards proposals to amend statutory transfer rights and to introduce a requirement to establish a ‘genuine employment link’ before taking a transfer, it is envisaged that regulations will contain relevant measures on evidence (including payslips and bank statements covering a three-month period).

It is also intended that regulations will include a condition requiring trustees of the ceding scheme to request information from the employer of the receiving scheme to evidence that the employer employs the member and participates in the scheme.

All steps in the right direction for combatting ‘pension scams’, which have reportedly increased during the pandemic.

Pension Schemes Commission

Finally, the debates on the Bill included the possibility of a Pension Schemes Commission. The government is non-committal, simply stating that such a commission is not the only way to identify options and recommendations for the future of pension schemes’ policy; nor is it the only way to engage with stakeholders.

I am not planning to hold my breath on the introduction of a new ‘Turner Commission’!

John Wilson

The 2020 Annual Funding Statement (AFS) from The Pensions Regulator (TPR) was published today (Thursday, 30 April) and is particularly relevant to schemes with valuation dates between 22 September 2019 and 21 September 2020 (so-called Tranche 15, or T15 valuations), as well as schemes undergoing significant changes that require a review of their funding and risk strategies.

The AFS sets out specific guidance on how to approach the valuation under current conditions, what TPR expect from trustees and employers, and what they can expect from TPR. TPR appreciate these are very “challenging times”. However, they expect all T15 valuations to fully incorporate the principles in the current DB code of practice and associated guidance.

The messaging builds on TPR’s Covid-19 guidance, repeating it in parts. The overarching theme is that, more than ever, trustees and employers need to work collaboratively.

The AFS contains some practical guidance on some scheme specific issues:

  • post valuation experience
  • changing valuation effective date
  • calculating technical provisions
  • recovery plan length
  • treatment of shareholders

As with the 2019 Statement, the 2020 AFS includes a helpful table setting out key risks and actions for employers and trustees.

We welcome the publication of the latest AFS which, understandably was issued a bit later than in previous years.

Whilst, for many pension schemes, there is understandably considerable focus on the short term, the longer term and, in particular, getting back on course to longer-term objectives, remains key. Many of the aspects previously outlined in TPR’s scheme funding consultation, such as the increasing importance on the role scheme maturity has to play and the “Fast Track and Bespoke” approaches, are still expected to come into force (albeit some of the parameters may necessarily have to change to allow for different market conditions).

In the meantime, TPR continue to expect trustees to focus on the integrated management of three broad areas of risk: the ability of the employer to support the scheme, the investment risks, and the scheme’s funding plans.

John Wilson

The Pension Schemes Bill 2019 – 2021 was announced in the Queen’s Speech on 19 December 2019 and introduced in the House of Lords on 7 January 2020. Having passed through Committee stage, the Bill will move to Report stage in the House of Lords, where scrutiny will continue.

These are, however, unprecedented times and everything is fluid. Parliament has now shut down until 21 April at the earliest to combat the spread of coronavirus. That said, the Bill is still expected to come into force, even if this is later than originally envisaged.

Key provisions aim to ensure that there will be criminal sanctions for bosses who put retirement incomes at risk and that pension savers will be provided with more holistic information on their retirement savings via dashboards.

Issues that are expected to be the focus on future debates include:

  • The new offences in Part 3 of the Bill (see our previous blog ‘Clause for concern’). When the Bill finally gets Royal Assent, The Pensions Regulator will issue, for consultation, further guidance on its approach to enforcement.
  • The provisions on long-term funding and investment strategy, where it will be interesting to see if there is any impact on the proposed measures as a result of the financial effects of the current pandemic.
  • Guaranteed Minimum Pension (GMP) equalisation where there have been calls to help trustees with their duty to address GMP inequalities and facilitate conversion of GMPs into non-GMP scheme benefits. Currently, the Bill does not contain any relevant provisions but the Government recognises the importance of the issue.

For the time being, pension scheme trustees and sponsors can only keep a watching brief on developments. In the words of Robert Kennedy, which seem very apt at the moment –

“Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind. And everyone here will ultimately be judged – will ultimately judge himself – on the effort he has contributed to building a new world society and the extent to which his ideals and goals have shaped that effort.”

John Wilson

Finance Bill 2020

The Finance Bill 2020 was published on 19 March.

The key pension measure, as announced in the 11 March Budget, is clause 21 on the Tapered Annual Allowance or ‘TAA’ (see below for the background to the TAA). 

This provision amends the TAA legislation in the Finance Act 2004 (FA 2004). It increases the maximum threshold income and adjusted income which an individual can earn without their annual allowance being reduced (or ‘tapered’). However, the clause also decreases the minimum TAA from £10,000 to £4,000. 

In more detail, the definition of a “high-income individual” is changed so that the tapering of the annual allowance will only apply to individuals whose adjusted income is greater than £240,000 (previously £150,000) and whose threshold income is greater than £200,000 (previously £110,000). 

The amendments to the Finance Act 2004 have effect for the tax year 2020-21 and subsequent tax years.

The measure will impact an estimated 250,000 individuals who are currently affected by the TAA.  Those earning more than £300,000 will see a reduction in their annual allowance and will pay more tax as a consequence. Likewise, those earning below £300,000 adjusted income are likely to see a reduction in the tax they pay because they are either no longer impacted by the taper and are entitled to the full £40,000 annual allowance, or they are still impacted by the taper, but their TAA has increased.

Scheme administrators of registered pension schemes will need to modify their systems to accommodate for the changes. 

The Finance Bill also confirms the tax rates and thresholds for 2020/21 and these can be viewed at – https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2020-to-2021.


What is the TAA?

The government introduced the TAA with effect from 6 April 2016 for those with incomes of over £150,000 including pension savings. The TAA is triggered when both the threshold income and the adjusted income (see below) exceeds their designated limits. The £40,000 annual allowance is reduced by £1 for every £2 that the adjusted income exceeds £150,000, to a minimum annual allowance of £10,000.

The government announced a review of the TAA because of its impact on the NHS and delivery of public services. Following this, the government confirmed that it will, from 6 April 2020, increase the threshold income from £110,000 to £200,000, the adjusted income from £150,000 to £240,000 and will decrease the minimum reduced TAA from £10,000 to £4,000.

The threshold income, which is broadly net income before tax (excluding pension contributions), is increased from £110,000 to £200,000.
The adjusted income, which is broadly net income plus pension accrual, is increased from £150,000 to £240,000.

The minimum TAA is decreased from £10,000 to £4,000. So, someone affected could have a TAA of between £4,000 and £40,000.

By way of example, someone with threshold income of £140,000 and adjusted income of £210,000 will currently have a TAA of £10,000. However, from 2020/21, assuming no change to their salary/pension benefits, their TAA for tax relievable pension savings will increase to £40,000.


John Wilson

Brexit – what happens next?

If you stayed up late on 31 January you would have witnessed the UK finally leaving the EU. A moment of history, indeed, but right now it may feel that not much has changed.

The Withdrawal Agreement (WA) came into force immediately, but several features of UK membership of the EU will be maintained during the so-called ‘transition period’ provided for by the WA (technically, this is not a transition period but rather a period of negotiation over a trade deal).

The legal basis for negotiations between the UK and EU will now be based on the same procedures applied for negotiations with other ‘third countries’ (under Article 218 of the Treaty on the Functioning of the EU).

The ‘transition’ period has been devised as ‘breathing space’ for the UK and the EU to try and negotiate a new relationship. It will last only until the end of this year (31 December 2020); theoretically, it could be extended but the UK Government has legislated to stop itself from seeking an extension.

For the remainder of 2020:

  • most EU rules will continue to apply to the UK;
  • the UK will still be part of the EU single market and customs union;
  • existing trade arrangements and rules for travelling within the EU will continue to apply;
  • the jurisdiction of the Court of Justice of the EU will continue as before; and
  • the UK will continue to pay into the EU budget.

The UK, however, can no longer take part in EU decision-making and is no longer represented in the EU institutions. UK representatives can participate in meetings of EU bodies where discussions are relevant to the UK, but they will not have a vote.

There are other arrangements that cease to apply straight away too; for example, UK citizens resident in EU Member States will lose the right to vote and stand in local and European elections.

Also, the EU will be able to exclude the UK from EU activities where participation would grant the UK access to certain security-related sensitive information. However, the EU Common Foreign and Security Policy will continue to apply to the UK.

The EU’s international agreements still apply to the UK during the transition period, but the UK is now permitted to negotiate and ratify new international agreements with non-EU countries provided that these do not come into force before the end of the transition period.

Beyond transition


As things stand, the above arrangements will end on 31 December 2020, but with some areas of the UK-EU relationship still covered by the WA, including rights of EU citizens living in the UK and UK citizens living in the EU at the end of the transition period; together with aspects of Northern Ireland’s relationship with the EU.

The nature of arrangements for other aspects of UK-EU relationship will depend on what is agreed in the next 322 days (sounds like a lot of time, but remember how long it took to get to this point!).

From a financial services perspective, subject to the planned UK / EU free trade agreement being successfully negotiated (and covering financial services in line with political declaration), the prospective arrangements will entail:

  • the free trade agreement;
  • the regulatory regime (largely) of the ‘host’ state;
  • benefits of any EU/UK ‘equivalence’ decisions; and
  • measures, if any, to smooth the impact of exit from the single market.
KEY POINTS FOR SPONSORS AND TRUSTEES
Most EU pensions law has already been incorporated into UK legislation and any changes will require further UK legislation, and the appropriate Parliamentary processes that precede it.
In the meantime, any concerns over investment strategy, sponsoring employer covenant and the resultant impact for scheme funding should be monitored as part of a scheme’s ‘integrated risk management’ (IRM).

Want to know more?


This blog is based on a Commons Library Insight article. For more comprehensive information, click on the links below.

John Wilson

B-Day has (almost) arrived

It has been nearly three years since the then Prime Minister gave the European Council formal notice of the UK’s intention to leave the EU.

We are all familiar with key events that have unfolded since then, not least the acrimony, polarisation of society and ugly scenes in the UK Parliament all of which were comprehensively covered by television, radio, newspapers and social media.

However, all said and done, it now looks as though Brexit will actually happen and that the UK will subsequently cease to be a EU member state.

Assuming that a ‘no-deal’ Brexit is avoided, a post-Brexit transition period will run from exit day until 31 December 2020, and could be further extended. During that period, most EU law will continue to apply to the UK and so it will look as feel, in many regards, as though the UK is still part of the EU.

The Withdrawal Agreement Bill has now been approved by Parliament and the Queen and has been signed by the EU Commission and Council; the European Parliament is expected to vote for it on Wednesday 29 January. It will amend the European Union (Withdrawal) Act 2018 (EUWA) to save the effect of most of the European Communities Act 1972 for the duration of the transition period, and will create the new body of retained EU law at the end of the transition period.

At the end of the transition period, the withdrawal agreement will address the future UK-EU relationship.

If the event of the UK and EU failing to conclude a withdrawal agreement, the UK will still leave the EU. However it will do so without an agreement or a transition period. EU law will stop applying to the UK on exit day.

In either scenario, what are the short-term implications for pensions?

The answer, at least from a legal perspective, is ‘not much’.

Most EU pensions law has already been incorporated into UK legislation and any changes will require further UK legislation, and the appropriate Parliamentary processes that precede it.

We may, over time, see divergence between UK and EU pensions law but, except perhaps for those few employers operating cross-border pension schemes, legally it will be business as usual.

There is less certainty from the perspectives of pension scheme investments and employer covenants.

Financial and economic volatility, the degree of which could be dependent on how the UK leaves the EU (see above), could be a major issue, but will be very scheme specific. Investment strategy, sponsoring employer covenant and the resultant impact for scheme funding should be considered as part of a scheme’s ‘integrated risk management’ (IRM).

Finally, some thought may also need to be given to operational issues where, for example, schemes pay pensions to EU ex-pats after the UK ceases to be a member state. The expectation, however, is that these pensioners will continue to receive their retirement incomes without interruption.

In the meantime, The Pensions Regulator has set out the areas it expects trustees to focus on in order to prepare their schemes for Brexit and all trustees should be familiar with this guidance:

John Wilson

Pension Schemes Bill

Here is your ‘bill’, sir

A few days after its publication, but before its second reading in the House of Lords on 28 January, the impact assessments for the Pension Schemes Bill 2019-2020 have been published.

Whilst quite lengthy, the assessments are worth a read because, in addition to providing assumptions and estimates around the costs to business and others of the Bill’s main measures, they provide some additional information and useful context not available elsewhere in the documents issued alongside the Bill.

Some of the headlines have already been reported in the pensions press, but here is a reminder and, hopefully, a bit more detail:

  • The cost to pension scheme members is largely expected to be nil, as there is little or nothing for them to do.
  • The main costs to businesses (employers and the pensions industry) relate to the ‘familiarisation stage’ of The Pension Regulator’s (TPR’s) new information gathering powers (£8.9 million) and changes to the Contribution Notice regime (£1.7 million).
  • In addition, declarations of intent have an estimated familiarisation cost to businesses of around £0.71 million, with an ongoing cost of around £1 million.
  • The requirement for a trustee and board statement (DB ‘Chair’s Statement’) also has an assumed cost of £1 million in terms of familiarisation. For ongoing costs, for the schemes that don’t already have a Chair, there will be an ongoing additional cost because of the higher pay associated with being a Chair rather than a trustee. The Impact Assessment estimates a scope of around 850 schemes that did not already have a Chair of the trustee board, this represents just over 15% of DB schemes. It is estimated that the ongoing costs incurred to businesses to be £19.5 million per year. The cost incurred to each scheme is, of course, assumed to vary depending on the size of scheme.

There is also a useful comparison of the current DC Chair Statement requirements and the proposed DB Chair Statement (reproduced below).

  • For the new long-term funding and investment strategy, it is anticipated that there will be minor familiarisation and implementation gross cost to business, partially offset by savings associated with improved clarity of the requirements (illustrative cost estimate for familiarisation when regulations are published is £1.5 million).
  • The proposed Pensions Dashboard is, not surprisingly given the infrastructure needed, the most expensive measure. There will be costs for the pensions industry to familiarise with new requirements and these costs are £2m in year 1 only. It is expected that there will be material costs for pension schemes and providers to invest in new software/IT architecture to be able to provide data to the dashboard(s). To provide data, ongoing governance, and regulatory compliance on an annual basis, one-off implementation costs and ongoing costs are estimated under three scenarios with different data requirements and coverage to highlight the potential range of impacts. Estimated one-off implementation costs range from £200m to £580m over 10 years and ongoing costs range from £245m to £1.48bn over 10 years.
  • Most of the new measures, where assessed, are expected to be broadly neutral in terms of impact on TPR and it is anticipated that there will be limited impact to the Pension Protection Fund (PPF). Some measures, such as the introduction of the Declaration of Intent is intended to help protect DB pension scheme members’ benefits and, in turn, will (according to the assessments) reduce the likelihood that a scheme will enter the PPF, also reducing costs to the PPF (and potentially benefitting businesses indirectly through a reduction in the pension protection levy).
  • The impact assessment does though note that there may be costs incurred to HM Prison service because of the new criminal sanction and custodial sentence for ‘Wilful or reckless behaviour in relation to a pension scheme’. It is estimated that the cost incurred to HM Prison Service is £26,274 in the first year and then £52,548 per annum thereafter.
Source:The impact assessments for the Pension Schemes Bill
John Wilson

Pension Schemes Bill

Here is your ‘bill’, sir

A few days after its publication, but before its second reading in the House of Lords on 28 January, the impact assessments for the Pension Schemes Bill 2019-2020 have been published.

Whilst quite lengthy, the assessments are worth a read because, in addition to providing assumptions and estimates around the costs to business and others of the Bill’s main measures, they provide some additional information and useful context not available elsewhere in the documents issued alongside the Bill.

Some of the headlines have already been reported in the pensions press, but here is a reminder and, hopefully, a bit more detail:

  • The cost to pension scheme members is largely expected to be nil, as there is little or nothing for them to do.
  • The main costs to businesses (employers and the pensions industry) relate to the ‘familiarisation stage’ of The Pension Regulator’s (TPR’s) new information gathering powers (£8.9 million) and changes to the Contribution Notice regime (£1.7 million).
  • In addition, declarations of intent have an estimated familiarisation cost to businesses of around £0.71 million, with an ongoing cost of around £1 million.
  • The requirement for a trustee and board statement (DB ‘Chair’s Statement’) also has an assumed cost of £1 million in terms of familiarisation. For ongoing costs, for the schemes that don’t already have a Chair, there will be an ongoing additional cost because of the higher pay associated with being a Chair rather than a trustee. The Impact Assessment estimates a scope of around 850 schemes that did not already have a Chair of the trustee board, this represents just over 15% of DB schemes. It is estimated that the ongoing costs incurred to businesses to be £19.5 million per year. The cost incurred to each scheme is, of course, assumed to vary depending on the size of scheme.

There is also a useful comparison of the current DC Chair Statement requirements and the proposed DB Chair Statement (reproduced below).

  • For the new long-term funding and investment strategy, it is anticipated that there will be minor familiarisation and implementation gross cost to business, partially offset by savings associated with improved clarity of the requirements (illustrative cost estimate for familiarisation when regulations are published is £1.5 million).
  • The proposed Pensions Dashboard is, not surprisingly given the infrastructure needed, the most expensive measure. There will be costs for the pensions industry to familiarise with new requirements and these costs are £2m in year 1 only. It is expected that there will be material costs for pension schemes and providers to invest in new software/IT architecture to be able to provide data to the dashboard(s). To provide data, ongoing governance, and regulatory compliance on an annual basis, one-off implementation costs and ongoing costs are estimated under three scenarios with different data requirements and coverage to highlight the potential range of impacts. Estimated one-off implementation costs range from £200m to £580m over 10 years and ongoing costs range from £245m to £1.48bn over 10 years.
  • Most of the new measures, where assessed, are expected to be broadly neutral in terms of impact on TPR and it is anticipated that there will be limited impact to the Pension Protection Fund (PPF). Some measures, such as the introduction of the Declaration of Intent is intended to help protect DB pension scheme members’ benefits and, in turn, will (according to the assessments) reduce the likelihood that a scheme will enter the PPF, also reducing costs to the PPF (and potentially benefitting businesses indirectly through a reduction in the pension protection levy).
  • The impact assessment does though note that there may be costs incurred to HM Prison service because of the new criminal sanction and custodial sentence for ‘Wilful or reckless behaviour in relation to a pension scheme’. It is estimated that the cost incurred to HM Prison Service is £26,274 in the first year and then £52,548 per annum thereafter.
Comparing the Statements for DC schemes with DB schemes.
Source: The impact assessments for the Pension Schemes Bill
John Wilson
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Keeping you informed

Latest TPR research

The Pensions Regulator (TPR) has published the latest edition of the ‘Defined Benefit Landscape’[1], its annual report on all DB occupational pension schemes registered with TPR (including those also providing DC benefits, as well as schemes not eligible for the Pension Protection Fund – PPF). This research is separate from the Purple Book, now published by the PPF and covering only PPF-eligible schemes, which is due out on 17 January 2020. A summary of key findings from the DB Landscape, based on information from the pension schemes register on 31 March 2019, is provided below.

Headlines

  • 13% of DB/hybrid schemes remained open to new members
  • 52% of memberships were in schemes which are closed to new members
  • The private sector had 10% active memberships compared with 37% of those in public service schemes

Schemes by status

In 2019:

  • 43% of schemes were closed to new members
  • 40% were closed to future accrual
  • 13% were open
  • 3% were in wind-up

The comparable percentages for 2010, the earliest year covered by the DB Landscape research, were: 48%; 22%; 17%; and 13%, respectively.

The figures vary quite materially depending on scheme size. For 2019, in schemes with 10,000 or more members:

  • 56% were closed to new members
  • 25% were closed to future accrual
  • 19% were open
  • 1% were in wind-up

The comparable percentages for schemes with 100 to 999 members were: 43%; 49%; 7%; and 2%, respectively.

Membership by status

In 2019:

  • 52% of memberships were in schemes closed to new members
  • 29% were in schemes closed to future accrual
  • 19% were in open schemes
  • 1% were in schemes in wind-up

The respective percentages for 2010 were 57%, 6%, 35% and 2%.

Across all schemes, there were 1,058,864 active members, 5,136,528 deferreds and 4,529,185 pensioners.

Principal employer type

Schemes sponsored by a college or education institution had more open schemes (31%) than schemes with any other type of principal employer (including government/public body where the equivalent percentage was 25%). The corresponding figures for private and public limited companies were 9% and 6%, respectively. Registered charity was also 6%. In terms of the proportion of memberships by status and principal employer:

  • For schemes sponsored by a college or education institution, 71% of memberships were in open schemes.
  • For schemes sponsored by government/public body, private limited company, public limited company or registered charity, the respective percentages were 10%, 17%, 11% and 27%.

Scheme funding

The following funding figures represent the schemes’ Part 3 funding valuations on a common date of end March 2019. For all schemes covered by the DB Landscape research, total assets were £1,700.95 billion and total liabilities were £1,860.20 billion. The split between type of scheme was:

  • For open schemes, £289.62bn assets / 317.2bn liabilities.
  • For schemes closed to new members, £987.18bn / £1,075.10bn.
  • For schemes closed to future accrual, £424.15bn / £467.82bn.

Most schemes, regardless of status, had a funding level of between 75% and 100%.

Indexation information

Schemes can adopt a variety of approaches to increases to pensions in payment. According to the DB Landscape research,

  • For pre-April 1997, 528 schemes used CPI as their measure of price inflation and 2,042 used RPI.
  • The respective figures for post-April 1997 (when indexation became a statutory requirement for benefits in excess of Guaranteed Minimum Pensions) were 1,309 and 4,083.

Public service pension schemes

There are 21 public service pension schemes. Until 2015, pension provision in the public sector was provided on a defined benefit basis. Since then, however, workers in all open public service schemes have accrued benefits on a Career Average (CARE) basis. In terms of the balance of membership types in public service schemes, there were:

  • 36.7% active memberships
  • 33.7% deferrreds
  • 29.6% pensioners

Comment

The DB Landscape research confirms the continuing trend amongst DB schemes towards full closure (closure to future accrual), but it also illustrates important differences amongst schemes depending on their size and industry sector of their sponsoring employer.

The indexation information is also noteworthy in the sense that, if the Government moves ahead with the proposal to change RPI, by aligning RPI with CPI, a significant proportion of schemes will be affected.


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