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The Pensions Regulator’s Annual Funding Statement 2022

The Pensions Regulator’s Annual Funding Statement 2022

29 Apr 2022

View PDF here

What you need to know

  • The Pensions Regulator (TPR) published its Annual Funding Statement (AFS) on 27 April 2022. It is aimed at both trustees and sponsors, particularly those with triennial actuarial valuations between 22 September 2021 and 21 September 2022.
  • TPR highlights the uncertainties for scheme funding and employer covenant driven by significant recent events: the conflict in Ukraine, the COVID-19 pandemic and Brexit. This is alongside the current background of high inflation, high energy prices, rising interest rates, slower economic growth and greater market volatility.
  • Favourable investment conditions over the last three years may mean that, for many schemes, funding levels are ahead of plan. TPR also comments on key considerations for schemes at or approaching full funding on their technical provisions basis and the importance of robust risk management.
  • Where trustees consider it appropriate to adjust their mortality assumptions, TPR have confirmed it expects any reduction to liabilities to be no more than 2%, unless there is strong evidence supporting a larger reduction.

Actions you can take

  • Understand the impact on covenant of recent events and monitor how it changes – consider independent advice especially for a complex or deteriorating covenant and ensure dialogue between trustees and employers is ongoing.
  • Plan for the long term, looking firstly to recover any technical provisions deficit then continue the journey to a long-term funding target (LTFT), all whilst managing risk in an integrated way.    
  • Choose key actuarial assumptions, such as inflation and mortality assumptions, carefully in light of current understanding of the position. Consider carrying out scheme-specific analysis to robustly determine the impact of COVID-19 on your scheme members.

Impact of significant recent events on schemes and employers

table of impact of recent events on pension schemes

The finer detail: TPR’s 2022 AFS – key items

table of employer covenant considerations
second table of considerations

For further information, please get in touch with Abigail Fletcher or Elen Watson or speak to your usual XPS contact.