The Pensions Regulator’s Annual Funding Statement 2024

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The Pensions Regulator’s (TPR) Annual Funding Statement 2024 (the AFS) is fairly compact setting out three key messages, some general considerations and rethinking strategy commentary. It is set against a backdrop of continued improved scheme funding for many schemes and a transition to the revised funding regime that came into effect on 6 April.

There is a clear emphasis on trustees looking at the endgame for their scheme and, when doing so, considering all of the potential options, not just the traditional buy-out route.

The AFS is directed at schemes that are undertaking valuations with effective dates between 22 September 2023 and 21 September 2024 or that need to review their funding and investment strategies. It also has general relevance for other schemes – all trustees are expected to understand the effect of the last couple of years’ material adjustments in market conditions on their schemes.

Key messages

With a caveat that schemes may find that their situation varies significantly to TPR’s aggregate estimates:

Key message 1: Most schemes will have significantly improved funding positions with half anticipated to be in surplus on a buy-out basis. This allows schemes to consider afresh their long-term objective (LTO) and whether run-on with surplus, consolidation or buy-out is an option.

Key message 2: The funding and investment strategy and risk levels of some schemes which have seen marked improvements may not be in members’ best financial interests. If this is the case, improvements should be ‘redirected’ so that the scheme has an appropriate strategy and risk profile.

Key message 3: It is not all good news. “Around a quarter of schemes are expected to remain in deficit on a technical provision basis.” The recovery plan should be “as short as reasonable, based on the employer’s affordability” with trustees being “very mindful of the employer covenant, given their higher reliance on it”.

General considerations – various issues covered in the main related to increased funding

Considerations for schemes with improved funding

  • Review funding and investment strategies which may reflect a different economic position than the current one.
  • Reliance on employer covenant may have decreased.
  • There may be an increase in employers asking to decrease/ suspend contributions and members asking for discretionary increases because of cost-of-living pressures. Trustees need to consider the overall position, covenant, future investment resilience and whether historical discretionary increases have been provided.

For open schemes, improved funding may mean:

  • A significant decrease in the cost of future accrual but perhaps more movement in funding levels meaning an increased focus on technical provisions compared to a long-term objective.
  • More reliance on employer covenant for a longer period.
  • Requests for surplus to be used to fund future accrual.

There then follow a number of general considerations for all schemes:

  • Economic uncertainty continues, including in relation to interest and inflation rates and geopolitical volatility.
  • TPR reiterates the importance of employer covenant as regards risk especially where funding is poor, or the employer is weak.
  • Climate change and sustainability are referenced for the first time – TPR notes that these are of mounting concern to trustees and employers given the potential impacts. Trustees need to consider the effects that such systemic risks could have on investment, funding and covenant.

Rethinking strategies: guidance based on three different groups of schemes

In the 2023 AFS, TPR provided tailored guidance for schemes dependent on three groupings. Both the groupings and expectations should still be relevant, and the rethinking strategies section uses the same groupings.

Group 1: Funding level at or above buy-out – consider buy-out or running on the scheme as main options with consolidation also possible

Trustees of Group 1 schemes need to consider whether to buy-out or continue running the scheme on. Advice will be needed including on trustee duties, risks, and benefits. Trustees need to have adequate understanding including where new options are being considered.


Insurer capacity constraints may mean having to delay buy-out and waiting until targets based on surplus, maturity, cash out flow or asset size are met. The strategy should be documented including why the trustees believe it is in the best interests of members. Trustees are encouraged to consider sustainability and are referred to accounting guidance.


If the scheme is moving to run-on, trustees need to make sure that this is “a better option for members” because of the involved risks, some of which can be mitigated. Larger schemes are more likely to benefit from this approach.

Group 2: Funding level above technical provisions (TP) but below buy-out – review LTO and timescales

Key steps include the following.

  • Considering whether the LTO is still suitable and reviewing timescales.
  • Setting one if there isn’t one already.
  • Accelerating the journey plan if funding levels have materially increased.
  • Checking that risk levels are appropriate.
  • TPR encourages Group 2 schemes to consider all options – this includes having a timetable for considering future options/ when the scheme might reach its LTO. The options include run-on or buy-out and ‘newer’ options such as consolidators (including the potential PPF public model) and capital-backed journey plans. TPR recognises that as the newer ones are still developing trustees may wish to see how things develop.
  • Potentially looking at whether the scheme could be more effectively managed from a governance and scale perspective – the AFS references TPR’s recent private market investments guidance.

Guidance on DB alternative arrangements for consolidation will be published later in 2024.

Group 3: Funding level below TPs – focus on ‘bridging gap’ to TP funding level

Schemes in this group should concentrate on eliminating the deficit as soon as the employer can reasonably afford and assessing whether the TPs are in line with the long-term funding target with risks being commensurate with the employer’s covenant.


The AFS is far shorter than previous statements with TPR stipulating that guidance from previous statements and the tables from the 2023 Statement are also applicable. The tables set out the key risks and Regulator expectations on covenant, investment and funding based on scheme characteristics, employer strength, funding levels and maturity. There are five scheme types, each one split into two sub-categories dependent on maturity. Trustees should identify the group nearest the scheme’s characteristics and set a recovery plan that balances “affordability with other reasonable uses of cashflow for the employer”. Our in-depth insights on the last two years’ statements can be accessed here and here.

The AFS will be the last one produced under the current funding regime – the revised regime applying to schemes with valuations with an effective date from 22 September 2024. Although schemes within scope are subject to the current funding framework there is a definite steer towards the new requirements with TPR noting that schemes should try to ‘align (even if broadly)’ with the revised DB code so that the next valuation is not too far away from where it will need to be under the new regime.

Still to come from TPR are the following:

Matter Expected timescale

The final versions of TPR’s revised DB funding code and Bespoke and Fast Track TPR approach.

You can read more about the code consultation and the statutory framework which is already in place here.

Summer 2024
Employer covenant guidance. Summer 2024
TPR response to consultation on statement of strategy needed under new DB funding regime. 2024
DB alternative arrangements for consolidation guidance. 2024
Notifiable events regime expansion and updated TPR documents. Unknown


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