Scheme financing

Controlling deficits and costs of your pension scheme

Your scheme financing will determine the pace and the time period over which you fund pension liabilities. Every scheme is different and we can help you make the right decisions, based on the constantly evolving interplay between:

  • The extent to which the scheme is dependent on the strength of the sponsoring employer;
  • The extent and nature of the risks posed by the scheme’s current investment strategy;

We’ve worked with pension schemes of all shapes and sizes, using our award-winning technology to help them develop financing strategies tailored to their individual needs. And because PwC also works with thousands of leading businesses, we bring a deep-rooted knowledge of corporate strategy to this process; we can help map out a scheme financing journey in the best interests of trustees, sponsor and member alike.

We’ll find the right option for your organisation as it seeks to finance past liabilities, deal with ongoing costs and plan for future benefits promises.

Financing past liabilities

The cash contributions the sponsor will make to the scheme must be agreed between the sponsor and the trustees as part of the funding valuation. We can help you achieve a successful funding valuation through:

  • A collaborative approach that manages conflicting objectives;
  • An understanding of what the sponsor is able and willing to pay;
  • An analysis of the prudence in the funding assumptions given the employer covenant and investment strategy in place;
  • An understanding of the sponsor’s business plan and future growth prospects;
  • An understanding of the regulatory environment, and the impact of current and potential future legislation;
  • Benchmarking of the assumptions made in scheme accounting.

2019 pension scheme funding survey

Our 2019 pension scheme funding survey which has been running for more than 10 years, looks at the funding position and valuation assumptions adopted by UK defined benefit (DB)  pension schemes. The 2019 update covers responses from 245 schemes covering over £250bn of liabilities. Our analysis brings out a number of key themes which reflect the challenges facing schemes and the actions they are taking to respond.

Non-cash scheme financing 

We’ll also work with you to establish whether there are opportunities for non-cash scheme financing. Asset-backed contributions can be used to finance past liabilities as an alternative to putting cash into the pension scheme, replacing part or all of the existing schedule of contributions with the income and security of a company asset. The potential benefits include:

  • The ability to pay cash to the scheme over a longer time period, thus retaining cash in the business for investment;
  • Potential to reduce the PPF levy;
  • Increased security for the pension scheme (potentially enhancing the employer covenant);
  • Avoidance of trapping a surplus in the pension scheme;
  • Flexibility over timing and deployment of tax relief.

To date, pension schemes have implemented more than 60 asset-backed contribution transactions involving assets worth approximately £10bn.

Dealing with ongoing costs

All eligible UK defined benefit pension schemes must pay PPF levies. The size of the levy is determined by an “Experian score” that depends on the profile of the scheme and the risk that its members might in future have to claim compensation from the PPF. We can help you to manage this cost by developing or improving systems to monitor and improve this score.

We’ve worked with many pension schemes to help sponsors and trustees collaborate on managing their PPF levies, drawing on our breadth of knowledge from legal and covenant advice to actuarial input.

Other scheme expenses relating to past liabilities can be significant if not monitored. We’ll help you assess whether scheme expenses are included in any cash contributions agreed as part of the funding valuation and ensure that both the sponsor and trustees understand the treatment. Tackling VAT leakage may be one option for reducing cost, for example.

Key actions to manage your PPF levy

Contact us

Krystyna Dougall

Senior Manager, PwC United Kingdom

Tel: +44 (0)7483 416349

Eimear Kelly

Eimear Kelly

Scheme Financing Actuary, PwC United Kingdom

Tel: +44(0)7768 051416

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