In May 2013, the Pensions Regulator (tPR) published its Defined Benefit (DB) Annual Funding Statement 2013, which is designed to help trustees and sponsoring employers agree valuations and deficit recovery plans that protect the interests of savers, whilst also being affordable for employers.

This year’s statement builds on the 2012 annual funding statement and sets out acceptable methods of valuation in the current climate.

The five key points of the statement are:

  1. trustees may need to make greater use of the flexibilities available to ensure that recovery plans are appropriately tailored to the scheme and to the employer’s circumstances;
  2. trustees can use the flexibility available in setting the discount rates. The assumptions made for the relative returns of different asset classes may rise or fall from preceding valuations;
  3. as a starting point, trustees should consider whether the current level of contributions can be maintained and are reasonably affordable for the employer;
  4. trustees should allow for an appropriate level of risk to be taken that is neither overly prudent nor overly optimistic; and
  5. tPR intends to move away from setting triggers focused on individual items (such as technical provisions) and continue to evolve a suite of risk indicators.

Whilst the statement is useful for all DB schemes, it is largely aimed at those undertaking valuations which take effect from 22 September 2012 to 21 September 2013.

In addition, tPR released supporting evidence and analysis on the funding statement, a research report on tPR’s 2012 scheme funding statement and a tax information and impact note.