Scheme funding
From its launch in March 1988, the Scheme has undertaken an Actuarial Valuation every three years.
Funding History
Prior to 2003 each of these Valuations indicated that the Scheme held assets in excess of its expected future liabilities. As a result, all members received bonuses in 1988, 1992, 1995, 1998 and 2001 in the form of additional increases in their pension – over and above the normal annual increases. Other members received percentage increases in the level of their accrued benefits.
In effect, the surplus was split between the members and the Company. The Actuary’s advice at the time was that there was no need for the Company to make contributions as the Scheme continued to be in surplus. Indeed, if the Company had made further contributions the funding position would have exceeded limits imposed by the Inland Revenue.
Funding Position
The Scheme’s funding position was agreed as at 31 March 2008 by the Trustee and the Company, with the Technical Provisions amounting to £4,168m, giving a Scheme deficit of £285m. The Scheme Actuary has reviewed this in an Actuarial Report as at 31 March 2009 which was issued to the Trustee
at its meeting on 18 June 2009.
It describes the development of the Scheme’s Technical Provisions and funding level over the year since the last valuation of the Scheme and should be considered in conjunction with the Report on the valuation as at 31 March 2008.
The 2009 Actuarial Report is not a formal valuation of the Scheme. However the Scheme Actuary confirmed that this report is consistent with the advice provided for the valuation
Review of the funding level
The 2009 Actuarial Report showed the funding level of the Scheme at 31 March 2009 to be 86% compared to 93% at 31 March 2008. In accordance with the agreed Recovery Plan during the year the Scheme received the following deficit reduction contributions from the Company.
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30 September 2008
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£10.0m
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31 December 2008
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£10.0m
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31 March 2009
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£18.0m
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In total, contributions (other than AVCs and the DC Section) of £49m were received by the Scheme over the period 1 April 2008 to 31 March 2009, of which £38m were in respect of the deficit. In addition, there were benefit and expense payments of approximately £230m, and market movements during the period (net of other cashflows) have reduced the assets by £148m, resulting in Scheme assets of £3,567m as at 31 March 2009.
The Scheme's large bond portfolio provides security for the members' benefits. The Scheme is able to pay members' pensions for many years in the future. The conservative investment strategy will limit the possibility of the funding level deteriorating further, but will equally make it unlikely that further surpluses will arise. However, it is the Trustee's intention that the Scheme should achieve a fully-funded position and maintain that position in the future. The Trustee will continue to work with the Company to seek a solution to the Scheme's funding issues and to try to ensure the best available security for members' benefits in the future.
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