TPR publishes its 2026 Annual Funding Statement

On 6 May 2026, 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 is particularly timely for those currently undertaking an actuarial valuation or those expecting to commence one over the next 12 months.

TPR notes that most schemes are continuing to see strong funding levels, with around 90% of schemes having a technical provisions surplus and around 60% in surplus on a buy-out basis on 31 December 2025.

TPR will issue a statement shortly on matters trustees should consider around surplus release (TPR previously said that this would appear in “early May”). This statement will be published at around the same time as a Department for Work and Pensions consultation on regulations. Later this year, TPR will consult on more detailed guidance to sit alongside the final regulations, which are expected to come into force in 2027.

More generally, TPR expects most schemes to be shifting their focus away from deficit recovery to endgame planning, but urges trustees to keep in mind the volatility caused by heightened trade and geopolitical tensions. TPR also suggests being mindful of other potential risks such as cyber incidents, climate change and wider sustainability issues. As always, TPR reminds trustees to understand the implications for the scheme’s investment strategy and covenant.

In the era of widespread surpluses, TPR says that valuations are increasingly becoming “a strategic tool” to inform endgame plans and “a structured opportunity to assess progress against long-term objectives”. It says that statements of strategy “should be driving the valuation process, rather than being a post-valuation by-product”.

TPR has grouped schemes into four broad categories:

• Schemes with a funding level of at least 110% on their low dependency basis should focus on finalising and implementing the endgame, with the investment approach taken by the trustees reflecting the chosen endgame. According to TPR, this group accounts for 60% of schemes – the same as the proportion of schemes with a buyout surplus.
• Schemes with a funding level at or just above low dependency should focus on endgame planning and appropriate monitoring, including 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 deficit as quickly as the employer can reasonably afford.

Based on experience to date, 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 (but not zero) likelihood of engagement with TPR.

The statement confirms that for Tranche 25/26 valuations (ie valuation dates between 22 September 2025 and 21 September 2026) TPR does not intend to amend the Fast Track parameters published in November 2024. However, TPR recognises that market conditions have changed since 31 March 2023, when the parameters were established; the parameters might be changed next year if current conditions persist.

TPR will keep the other conditions required to meet Fast Track under review and will review the definition of ‘low risk’ as it relates to schemes with buy-in policies covering all members (presumably to reflect difficulties in schemes complying with the literal interpretation of the definition).

The statement also addresses queries that have been raised with TPR regarding the new funding regime, including:

• Clarifications on assessing and monitoring the employer covenant (including acknowledging inadequate covenants, disclosing all contingent assets in the statement of strategy - even if not being relied upon to support the agreed strategy - and ascribing value to non-look through guarantees).
• Treatment of surplus and asset-backed contributions when assessing supportable risk.
• The approach to deficits after the relevant date, where the focus should be on affordability of additional contributions and contingent support rather than increasing investment risk.
• The approach to setting expense reserves for low dependency.
• How to assess high resilience for the low dependency investment allocation.

TPR has published supporting analysis alongside the statement.

TPR also notes that the statement provides some key information regarding its new DB funding code of practice and other relevant publications such as its guidance in new models and options for DB schemes, which it suggests should help trustees when considering endgame options.