On the go: Home construction company Taylor Wimpey has suspended escrow payments to its defined benefit pension scheme due to its strong funding position.
In 2021, the company entered into a funding arrangement with the Taylor Wimpey Pension Scheme that provided for £20mn in payments to an escrow account between April 2021 and March 2024. Though the first six months’ worth of payments were guaranteed, totalling £10mn, payments from October 1 2021 were subject to a quarterly funding test.
Under the terms of the agreement, payments to the escrow account would be suspended if the scheme’s funding position on a technical provisions basis exceed 100 per cent, and would only restart if that figure fell to 98 per cent.
According to the company’s half-year results, the funding test as at September 31 2021 showed a funding level of 103 per cent, and payments were consequently stopped from October 1.
The half-year report states that £2mn in contributions to scheme expenses continue to be made, as well as £5.1mn in contributions via a pension funding partnership.
Total scheme contributions and expenses were £6.1mn, down from £16.4mn in H1 2021, with £5mn of the reduction attributed to the lack of payments to the escrow account.
Where funding targets are not met at the time of a quarter-end funding test, contributions of £5mn would be paid each quarter until the funding level is back at 100 per cent or higher.
The most recent funding test as at June 2022 showed a surplus of £70mn and a funding level of 103 per cent.
The IAS valuation of the scheme on July 3 2022 showed a surplus of £211.6mn, up from £149.9mn at December 31 2021, though International Financial Reporting Interpretations Committee 14 requirements stipulate that a deficit must be recorded on the company balance sheet, as the surplus is not recoverable by the group.
The company had retirement benefit obligations of £30.4 million at July 3 2022, down from £37.3mn in December 2021, with a DB pension liability of £30.1mn, down from £37mn.
“The group continues to work closely with the trustee in managing pension risks, including management of interest rate, inflation and longevity risks,” the report said.
