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Aon says tPR Annual Funding Statement puts greater emphasis on planning and monitoring


Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that the latest Annual Funding Statement from the Pensions Regulator makes a clear direction to schemes to improve their planning and monitoring of wider business developments, while also being ready to adjust to changing situations.  Aon believes that both trustees and employers will need to factor this into their business plans, also recognising that the Regulator appears willing to be both more active and more directive.

Matthew Arends, partner at Aon, said:
“There are two big picture messages in the statement. First, actuarial valuations need to go beyond simply setting contributions to include implementing plans to manage risks to the scheme. Second, ”fix the roof while the sun is shining" either now or in the future. The Regulator expects higher contributions or more security from employers now - if they can afford it - but otherwise enforceable plans for contributions to increase, if and when that becomes possible in the future. The Regulator recognises that on average schemes will be better funded this time round – but rather than resting on laurels, now is the time to get busy with long term plans.  

“One specific example is the increased emphasis the Regulator places on the fair treatment between the pension scheme and other stakeholders, particularly dividends to shareholders compared to deficit contributions. The Regulator is saying that trustees should not agree the valuation outcome if they believe that the pension scheme would be disadvantaged by it.”

Matthew Arends added:
“We expect more emphasis on planning for future valuations not just the current one, on documenting contingency plans, and on analysing deficit contributions against dividends and overall employer distributions"

Lynda Whitney, partner at Aon said:
“This is the first announcement from the Regulator since the Department of Work and Pensions White Paper, and the Regulator will still need to consult on a new Funding Code probably in late 2018, but they are perhaps doing the groundwork by referring to action to take on ”weak technical provisions" in some examples in this statement. Trustees and employers need to consider prudence levels in 2018 valuations in anticipation of future changes.
“The Regulator is increasing its focus on transfer activity by recommending trustees monitor the level of transfers, record the regulated financial advisers being used, and seek advice on liquidity management. High levels of transfer activity combined with maturing schemes can increase a scheme’s cash outflow - and schemes need to know how they will manage their liquidity even if there is also adverse investment performance.”  

About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

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