TPR publishes its 2025 Annual Funding Statement

On 29 April 2025, The Pensions Regulator (TPR) published its latest annual funding statement. This is relevant to trustees and sponsors of all private sector defined benefit (DB) pension schemes, but particularly those undertaking an actuarial valuation with an effective date between 22 September 2024 and 21 September 2025 (referred to as ‘Tranche 24/25’ – or ‘T24/25’ – valuations, the first tranche carried out under the new funding and investment strategy regulations). TPR also notes that the statement provides some key information regarding its new DB funding code of practice and updated covenant guidance.

TPR notes that most schemes are currently seeing strong funding levels, with most now in surplus on a technical provisions basis, whilst acknowledging that there will be considerable variations from scheme to scheme. As a result, TPR expects most schemes to be shifting their focus away from deficit recovery to endgame planning, but urges trustees to keep in mind the potential for heightened trade and geopolitical uncertainty, as well as consider dynamics such as artificial intelligence and energy transition, and to understand the implications for the scheme’s investment strategy and covenant. The statement notes that TPR will be publishing some ‘DB endgame’ guidance in the coming weeks.

TPR expects that until more information is shared by the Government about any changes to the requirements for surplus release, trustees should follow the existing legislation and the scheme rules. TPR suggests that it would be good practice for trustees to have a policy in place around the release of surplus in relation to their scheme and their approach to any potential requests from the employer.

TPR has grouped schemes into three broad categories:

• Schemes with a funding level at or above low dependency should focus on endgame planning and appropriate monitoring, including of the sponsor covenant
• Schemes with a funding level above technical provisions but below low dependency should focus on the path to achieving low dependency
• Schemes with a funding level below technical provisions should focus on addressing the technical provisions deficit as quickly as the employer can reasonably afford.

TPR estimates that around 80% of schemes will be able to satisfy the requirements for submitting a valuation under the new ‘Fast Track’ regulatory route. The statement notes that whilst this may not be the right approach for all schemes, it provides the option of submitting less information via the new statement of strategy and reduced likelihood of engagement with TPR. The statement confirms that for T24/25 valuations TPR does not intend to amend the Fast Track parameters published in November 2024.

TPR expects to publish its response to the consultation on the statement of strategy alongside the launch of its new digital valuation submission service in Spring 2025. Trustees will not be able to submit actuarial valuations until the new service is live although any delays in submission during this period will not be treated as a breach where the actuarial valuation has otherwise been completed within the statutory deadline.

The statement also addresses queries that have been raised with TPR regarding the new funding regime and clarifications related to the revised covenant guidance published in December 2024, including:

• The assessment of supportable risk
• What it means to take a proportionate approach to assessing covenant
• Assessing the reliability period
• The role of covenant longevity in setting a scheme’s journey to low dependency
• The role of covenant once a scheme is fully funded on a low dependency basis
• Clarification on whether PPF compliant guarantees are considered as ‘look-through’ guarantees.

TPR has also published supporting analysis alongside the statement.

Contact

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Graham McLean

Head of Scheme Funding

email Email

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