Scheme funding: TPR’s twelfth analysis

In June 2019, the Pensions Regulator (TPR) published its twelfth annual analysis of valuations and recovery plans, covering valuations with an effective date between 22 September 2016 and 21 September 2017. The analysis covers scheme demographics, assumptions used and details of recovery plans. This briefing note summarises some of the key findings.

In brief

The Pensions Regulator has published its twelfth analysis of valuation submissions

Funding levels have improved compared with Tranche 11, but are slightly lower than those in the Tranche 9 analysis

The average recovery plan length has reduced between Tranche 9 and 12 from 8.0 to 7.3 years

Discount rates have fallen compared with Tranche 9

Life expectancy assumptions are slightly lower than Tranche 9

Next steps

Trustees and employers (especially those with Tranche 12 valuations) may wish to refer to the analysis when benchmarking their own experience against that of other schemes. Please speak to your XPS Pensions contact if you would like further information on this


Each year, TPR publishes an analysis of the data it receives based on valuations with an effective date falling within the year to 21 September. (This date reflects the fact that the start of the scheme funding regime was 22 September 2005.) In most cases, Tranche 12 relates to schemes which are in their fourth triennial cycle of the scheme funding regime. As a result, comparisons can be made with the analysis from Tranches 3, 6 and 9, which covered the funding valuations for the same schemes. Comparisons can also be made with valuations from the previous year (Tranche 11), although this is for a different group of schemes.

Scheme demographics

The latest analysis includes 1,882 total valuations with 1,452 recovery plans in respect of Tranche 12, compared with 1,530 recovery plans in Tranche 9, 1,652 in Tranche 6 and 1,840 in Tranche 3. Over one fifth (430) of Tranche 12 schemes reported a surplus.

Some key characteristics of the Tranche 12 schemes in the analysis include:

  • more than three quarters have fewer than 1,000 members;
  • approximately three quarters have technical provisions of less than £100m;
  • nearly one third have more than 50% of their technical provisions as pensioner liabilities; and
  • 24% have more than 60% of their assets in return-seeking assets (compared with 47% for Tranche 9).

TPR also provides an analysis of its assessment of covenant into four groups – weak, tending to weak, tending to strong and strong – as shown in the chart below.


Funding ratios

The average (unweighted) funding level of all Tranche 12 schemes is 88.5%. This is higher than for Tranche 11 (87%), but slightly lower than for Tranche 9 (89.4%). The growth in assets matched the growth in liabilities between Tranche 9 and 12 valuation dates for many schemes, resulting in a relatively unchanged average funding ratio on a technical provisions basis.

Recovery plans

The average length of recovery plans in Tranche 12 was 7.3 years, a slight reduction from 8.0 years in Tranche 9. In general, those with weaker covenants, those with contingent assets, and those with a higher stake in return-seeking assets have longer recovery plans. Overall, 75% of schemes in deficit have recovery plans of less than ten years. Just under half of schemes have brought forward their recovery plan end dates or have left them unchanged, while around one tenth have extended their recovery plan end dates by more than six years.

Discount rates

There is a significant amount of analysis of the discount rates adopted and the level of outperformance over a single reference yield. The main points to note include:

  • the 20-year nominal spot rate on gilts reached a 10-year low near the end of the Tranche 12 valuation period;
  • the average single effective discount rate fell by 1.8% p.a. to 2.78% p.a. for Tranche 12, compared to 4.58% p.a. for Tranche 9 which was largely due to the fall in gilt yields seen over the period; and
  • the average outperformance assumed above the 20-year nominal spot rate was 0.9% p.a. for Tranche 12, compared to 0.97% p.a. for Tranche 9.

Mortality assumptions

Over the first three funding cycles, there were notable increases in average assumed life expectancies, reflecting stronger mortality assumptions over that period. Assumptions regarding average life expectancy improvements are generally lower for Tranche 12 schemes relative to both Tranches 6 and 9, for both future and current pensioners. This reflects the general trend observed in the wider population over the last few years.

The following graph shows a comparison of the range of life expectancies assumed between Tranche 3, 6, 9 and 12:

Distribution of life expectancy assumptions for future male pensioners currently aged 45 (Tranches 3, 6, 9, 12)


The notable findings reported in Tranche 12 are as follows:

  •  the Self-Administered Pension Scheme (SAPS) series tables, produced using data from occupational pension schemes, are being  used by 96% of schemes in deficit;
  •  95% of schemes in deficit use a long-term rate of improvement or underpin;
  •  over 80% of schemes assume a long-term rate of improvement of 1.5% or higher, with 7% assuming a rate of 2% or higher; and
  • 96% of schemes use the Continuous Mortality Investigation (CMI) projections model.

Contingent assets

Less than a fifth of Tranche 12 schemes are holding at least one contingent asset. However, less than 10% of Tranche 12 schemes hold at least one PPF-recognised contingent asset. The majority of contingent assets are guarantees from the parent company or associated entity.

For further information please contact Graham Robinson

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