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Scheme funding analysis 2021 annex

Annex: valuations and recovery plans of UK defined benefit (DB) and hybrid pension schemes.

Published: 27 July 2021

Data coverage

The data contained in this statistical release were submitted by schemes to The Pensions Regulator (TPR) in triennial valuation summaries, their associated recovery plans (RPs), and annual scheme returns.

The data set builds on previous releases and includes Tranche 14 valuations and associated RPs received up to 31 January 2021. It also includes data on schemes in surplus for all tranches.

Tranche 14 is the second tranche of the fifth cycle of the Scheme Funding Regime. The majority of Cycle Four plans (Tranches 10, 11 and 12) and Cycle Three plans (Tranches 7, 8 and 9) are fourth and third valuations respectively under the scheme funding regime. However, Tranches 3, 6, 9 and 12 (1, 4, 7 and 10, etc) do not constitute a perfect cohort. There are a few reasons why this may be the case, including the following:

  • some schemes have had their most recent valuation less than three years since their previous valuation
  • where a scheme’s assets were less than its technical provisions (TPs) in the previous cycle (ie Tranche 11) but exceeded its TPs for its valuation under the current cycle (ie Tranche 14)
  • where a scheme has wound up or is in the process of winding up
  • where a scheme has transferred to the Pension Protection Fund (PPF)

Base data varies slightly in different sections as a result of data coverage, validation, and cleaning.

The data count all memberships in schemes with a promise to a pension. As some individuals may have a number of pension entitlements spread over a number of schemes, they may be included more than once in the total memberships under consideration.

The summaries on mortality assumptions are based on current male pensioners aged 65 only, unless otherwise stated.


Weighted averages are weighted by TPs. Where ‘average’ is used in the report, it refers to the mean.

Owing to the scheme-specific nature of the data, individual data points cannot be presented in some instances. As such, data distributions start and end at the 5th and 95th percentiles respectively, and in some instances group ranges have been broadened to include figures comprising fewer than 10 observations.

Figure totals may reflect rounding.

Maturity is measured as the ratio of pensioner TPs to total TPs.

The discount rate assumption is reported in one of two formats:

  • a single investment return
  • different investment returns for pre-retirement and post-retirement benefits

For the purposes of comparison, in instances where different rates have been reported, a single effective discount rate (SEDR) is calculated. This is based on the single rate or, where a different rates approach has been adopted, constructed from both the pre- and post-retirement rates. This is calculated using the following equation of value:

(ActiveLiabilities)×(1+Pre−retirementDiscountRate ) ActivePre−retirementDuration ×(1+Post−retirementDiscountRate ) ActivePost−retirementDuration +(DeferredLiabilities)×(1+Pre−retirementDiscountRate ) DeferredPre−retirementDuration ×(1+Post−retirementDiscountRate ) DeferredPost−retirementDuration +(PensionerLiabilities)×(1+PensionerDiscountRate ) PensionerDuration =(TotalLiabilities)×(1+SEDR ) TotalDuration

The duration parameters used in the above formula are estimated on a scheme by scheme basis, using data provided to us in the annual scheme return and valuation returns. Using the above formula the SEDR has been calculated for all schemes (tranches 1-7: schemes in deficit only, tranches 8-14: all schemes), and as such historical positions will differ to earlier publications.

Average annual deficit repair contributions (DRCs) summarised in Table 3.4 are calculated as the average of DRCs over the first four years of the RP.

The outperformance of the SEDR is calculated using different 20-year gilts (nominal and real) to previous editions. As a result, the levels of outperformance assumed will differ to those shown in previous reports. The differences may be inconsistent across tranches because the relationship between the Bank of England 20-year nominal government spot rate and FTSE index 20 year conventional gilt (used previously) varies at different dates.

Covenant Groups (1-4) are assigned at the point of initial RP reviews to facilitate prioritisation. These grades may vary to the view taken during case-level intervention, where a wider range of information is taken into account. They are defined as:

  • Covenant Group 1: Strong
  • Covenant Group 2: Tending to strong
  • Covenant Group 3: Tending to weak
  • Covenant Group 4: Weak

Covenant assessments are not usually undertaken for schemes in surplus.

‘Return-seeking assets’ as a proportion of total assets held comprise the sum of:

  • 100% of a scheme’s allocation to equities
  • 75% of property
  • 100% of commodities
  • 60% of Insurance policies
  • 80% of hedge funds
  • 25% of corporate bonds
  • 100% of assets held in the ‘other’ category

The PPF stressed asset ratio used in this report refers to: the ratio of the stressed value of assets to the (unstressed) market value of assets. For the purposes of this report the stressed value of assets is calculated for all schemes using the standard approach, but where the results of a bespoke stress have been submitted these have been instead used. The methodology for the standard stress test is consistent with the methodology published in the relevant levy year.

Employer Industry Classification and Geographical Area as used in the Life Expectancy section have been derived using:

  • the SIC code, and
  • the Registered Trading Address post code of the largest sponsoring employer by number of DB members to each scheme

Schemes in the data set

Table 1.1: Number of valuations analysed by cycle and tranche (schemes in surplus and deficit, all tranches)

Funding and other security arrangements

Table 2.1a: Key average funding ratios (schemes in surplus and deficit)

Table 2.1a: Key average funding ratios

Table 2.1b: Key weighted average funding ratios (schemes in surplus and deficit)

Table 2.2: Distribution of key funding ratios on various bases

Table 2.3a: Average [Unweighted] ratio of assets to TPs by scheme characteristics (schemes in surplus and deficit)

Recovery plans and contributions

Table 3.1: Distribution of recovery plan lengths (schemes in deficit only)

Table 3.1: Distribution of recovery plan lengths

Table 3.2: Distribution of recovery plan lengths (for schemes in deficit submitting valuations in respect of both Tranches 11 and 14)

Table 3.2: Distribution of recovery plan lengths

Table 3.3: Average recovery plan length by scheme characteristics (schemes in deficit only)

Table 3.3: Average recovery plan length by scheme characteristics

Table 3.4: Average annual contributions as a percentage of technical provisions liabilities by scheme characteristics (schemes in deficit only)