After the BBC decided to bring forward its triennial valuation in light of improved funding, Pensions Expert looks at whether more schemes are likely to follow.
The BBC’s decision to bring its actuarial valuation date forward by a year – owing, in part, to its improved funding position – is not being mirrored by many other schemes, experts say.
The broadcaster’s defined benefit (DB) pension scheme achieved a small funding surplus last year of 101%, according to its 2023 interim annual update.
Writing in the BBC Pension Scheme’s 2024 Summary Report, Catherine Claydon, chair of the trustee board, noted that this marked a funding surplus “for the first time in many years”.
The BBC and the trustee agreed to bring forward the scheme’s full actuarial valuation by a year to 1 April 2024.
“Full valuations require significant time and resources to complete and the decision to carry out the full valuation a year earlier than required was taken following careful deliberations,” Claydon wrote.
“The trustee’s decision was taken against the backdrop of the scheme’s improved funding position, and in the context of amendments to existing measures that the BBC has agreed to implement as part of the 2024 full valuation.”
Wider finance review
Measures include additional triggers for payments to the scheme, to protect it against “potentially adverse events”, Claydon added.
The broadcaster’s funding model is currently being reviewed in a process led by the Department for Culture, Media and Sport. The review will aim to report to the government by autumn this year.
Dan Gilmour, trustee director at professional trustee firm Independent Governance Group, told Pensions Expert that, with this review under way, the BBC’s decision to bring forward its valuation was understandable.
“If they can get the valuation nailed down now, know what they’re going to have to contribute and not have that uncertainty when they’re negotiating over what’s going to happen to the licence fee, then I think it makes a lot of sense,” he said.
‘Unnecessary to bring forward valuations to bank gains’
Consultancy Broadstone’s chief actuary David Hamilton told Pensions Expert that “a small minority of schemes have been revisiting their funding agreements ahead of the usual three-year schedule”.
“In some cases, the funding improvement is so pronounced that trustees and sponsors are simply agreeing new interim contribution schedules that take ‘a step in the right direction’ pending completion and sign-off of a new valuation in 12-18 months’ time,” he said.
“This is a more common route as it can be a pragmatic win-win for trustees and employers, giving some material cost savings without incurring the cost [or] disruption of a new valuation and still erring on the prudent side in the interim.”
Hamilton said “a very small subset” of schemes were bringing forward valuations by a year, but added that “it is very rare and much more difficult to move to a different date”.
Laura McLaren, head of DB actuarial consulting at consultancy Hymans Robertson, told Pensions Expert that “over the last few years lots of schemes have been making changes to contributions, but we haven’t necessarily seen a large number of schemes changing their valuation date”.
She added: “Pension scheme funding has been improving over several years and as a result many schemes have already been able to factor funding improvements into their most recent triennial valuations as these have come around.”
The Pension Protection Fund’s 7800 Index of private sector DB schemes has shown a steady improvement in the aggregate funding level, from 96.5% in January 2021 – the last time the index was in deficit – to 148.5% as of the end of July 2024.
Even when schemes have not built improvements into their most recent valuations, McLaren said that “it is not always necessary to bring forward a full actuarial valuation to bank gains between valuations”.
“Most schemes will have regular monitoring in place, with many feeding in up-to-date member data, and recovery plans can build in triggers for contributions to automatically stop when full funding is reached.”
Further reading
BBC reschedules valuation as scheme hits surplus (14 August 2024)
Trustees warned against complacency as surpluses remain (12 July 2024)
