The Pensions Regulator has published its annual funding statement. The statement, which is primarily aimed at trustees and employers of defined benefit (’DB‘) schemes undertaking valuations with effective dates in the period 22 September 2014 to 21 September 2015, sets out the Regulator’s “key messages”, which include:

  • emphasis on the continuing uncertainty about future market conditions and the impact this may have on scheme funding. The Regulator anticipates that most schemes will set funding strategies based on lower expected investment returns than at their last valuation, giving rise to larger deficits;
  • encouraging trustees to undertake a higher level of due diligence on an employer’s affordability in cases where previous levels of employer contributions can no longer be maintained; and
  • a warning about the potential impact of the new pensions flexibilities on funding levels of DB schemes. If significant numbers of members transfer their benefits to defined contribution arrangements, this will affect a scheme’s cash flow and therefore its investment and funding strategies. Appropriate advice should be taken as to the implications of such changes.

A link to the full statement can be found here.