The Scheme is a defined benefit pension arrangement which means your pension is paid from a single pot, known as the fund.
We keep a close eye on the Scheme’s financial health to make sure there’s enough money set aside in the fund today to make all future pension payments as they are due.
We complete an ‘in-depth financial health check’ known as an actuarial valuation every three years and an annual health check in the years in between.
We ask the Scheme Actuary, who is independent from the Scheme and the Company, to look at the difference between how much the Scheme needs to pay the pensions built up (liabilities) and the total amount set aside in the fund to pay those pensions (assets). It shows whether the Scheme is in surplus (where the assets are worth more than the liabilities) or in deficit (where the assets are worth less than the liabilities). It's important because it tells us whether the Scheme’s investments are on track to cover the cost of paying pensions, or if we need to take action.
WHEN IS THE NEXT FINANCIAL HEALTH CHECK?
The next in-depth financial health check is currently being calculated as at 31 March 2024. This requires calculating each individual pension benefit and takes a while, so we’ll share the outcome of that check on the Scheme website as soon as it’s ready and in next year’s Pensions Update. Below is a reminder of the Scheme’s position at the last annual health check. We hope it gives you reassurance that the Scheme is well-run and financially secure.
THE LATEST RESULTS
Both the Scheme assets and liabilities have seen a large drop in value since 2022, which was largely due to significant increases in interest rates. When interest rates increase, this reduces the amount the Scheme needs to put aside to pay future pension payments. At the same time, the value of certain investments in the Scheme’s assets, such as government bonds and insurance policies, held to match the value of future pension payments, also decrease in value.
As a result, despite the drop in values of the assets and liabilities, the Scheme’s funding level stayed much more stable. This reflects the Scheme’s investment strategy, which is designed so that movements in the assets and liabilities are broadly matched.
We have to pay pensions for a very long time, so a surplus doesn’t mean the Scheme has more money than it needs, but it does tell us the Scheme is currently in a healthy financial position for the future.
MORE INFORMATION
For detailed information about the latest in-depth financial health check from the Scheme Actuary, members can request a copy of the full Actuarial Valuation Report by contacting the Pensions Administration Team.