The Pension Regulator’s 2025 annual funding statement

Commenting on The Pension Regulator’s 2025 annual funding statement published today, Laura McLaren, Head of DB Scheme Actuary Services, Hymans Robertson, said:

“With schemes tackling their first valuations under the new funding regime, it’s not a surprise to see this year’s statement from The Pensions Regulator (TPR) speaking in large part to those new requirements. DB endgames, surplus sharing and market volatility all get notable airtime too.

“On the Funding Code, there is little in this year’s statement by way of additional technical guidance, but there are some helpful clarifications addressing areas such as covenant, supportable risk and what ‘proportionality’ looks like as schemes wrestle with putting the theory into practice. TPR also confirm the new ‘Submit a scheme valuation’ digital service will launch soon – the final piece of the puzzle for collecting scheme data and plans. Detail on how TPR will assess submissions remains fairly scant, though they state they will be ‘risk-based and outcome focused’ when deciding which schemes to interact further with and less likely to engage with schemes going Fast Track. Nevertheless, until clearer market practice develops, keeping compliance proportionate remains a tricky balancing act, especially with schemes becoming increasingly well-funded.

“The statement highlights that trustees should not underestimate the time needed to meet the Code’s additional compliance requirements given all the new elements introduced. Early planning, working collaboratively with the employer and bringing actuarial, covenant and investment advisers together, are all key steps that will help to smoothly integrate the new regulations.

“Beyond the immediate requirements of the new Funding Code, TPR also go further in discussing the growing interest in DB surpluses than we’ve seen in previous statements. Although more specifics on DB surplus and the government’s plans to legislate will come as part of the upcoming Pensions Bill, it is encouraging that TPR are committing to publishing more DB endgame guidance in the coming weeks. This continues to underscore the growing policy focus and intent in this area. TPR estimate just over half of schemes are now in surplus on a buy-out basis and 76% against a low dependency measure.

“The steer from TPR for trustees to plan ahead, robustly considering their endgame and policies for any release of surplus in the context of their individual scheme, including how they would approach any employer request, is particularly helpful. With regulatory reform looking set to meaningfully increase the potential flexibility around surplus, starting to explore scheme-specific circumstances and objectives will be time well spent. This endgame planning will be most effective where trustees and sponsors work together.

“Ultimately, after a transformative few years within the DB landscape, trustees and sponsors should be grasping the opportunity to pause, take stock and review plans. Not only to ensure that they’re robustly meeting the compliance requirements of the Funding Code but also maximising the opportunity to improve long-term outcomes.”