The Statement of Investment Principles
This sets out how the Trustee invests the money paid into the Scheme.
Summary Funding Statement
Your 2024 Summary Funding Statement
As a member of the Defined Benefit Section of the Prudential Staff Pension Scheme, you will be aware of the valuable benefits that membership of the Scheme provides. Knowing how the Scheme is doing financially, and whether your benefits are secure, will therefore be important to you.
Your Summary Funding Statement helps you to keep up-to-date and understand more about the funding of the Scheme. This year, we provide you with an update on the financial position of the DB Section, as well as answers to some of the questions you may have about its financial health. The Statement is provided for
information only. Further details are set out below.
The latest funding review
Formal funding reviews of the Scheme are carried out every three years. The most recent funding review took place as at 5 April 2023.
In the years in between the formal funding review, the Scheme Actuary carries out an annual funding update for the Trustee to assess how the assets and liabilities have changed since the last funding review. Since the 5 April 2023 review, the Scheme Actuary has completed an annual update at 5 April 2024.
The funding results as at 5 April 2024 as well as the results of the formal review as at 5 April 2023 are shown in this Summary Funding Statement.
The Scheme’s funding targets
The responsibility for agreeing the current funding position and future contributions to the Scheme rests jointly with the Trustee and Company. They assess the financial health of the Scheme with reference to two funding targets — the Ongoing Target and the Scheme Solvency Target. These targets are explained on subsequent pages. The principles underlying the funding targets are set out in a Statement of Funding Principles, which has been agreed by the Trustee and Company and which is available to members on request.
Results based on the Ongoing Target
The assumptions that the Trustee currently uses for the Ongoing Target include a realistic allowance for anticipated investment returns on an investment strategy made up mainly of bonds, and reflect current thinking about inflation and mortality and the Company’s current policy for awarding discretionary pension increases.
The table below shows how the assets of the DB Section compared to the Ongoing Target at 5 April 2022, 5 April 2023 and 5 April 2024.
2024
The Scheme’s assets
£4,359m
The amount needed to provide benefits (liabilities)
£4,082m
The Surplus
£277m
The funding level:
107%
2023
The Scheme’s assets
£4,775m
The amount needed to provide benefits (liabilities)
£4,434m
The Surplus
£341m
The funding level:
108%
2022
The Scheme’s assets
£6,650m
The amount needed to provide benefits (liabilities)
£6,137m
The Surplus
£513m
The funding level:
108%
2021
The Scheme’s assets
£7,207m
The amount needed to provide benefits (liabilities)
£6,612m
The Surplus
£595m
The funding level:
109%
2020
The Scheme’s assets
£7,714m
The amount needed to provide benefits (liabilities)
£7,060m
The Surplus
£654m
The funding level:
109%
When bond yields rise, the amount of assets needed to pay future benefits reduces, as does the value of the Scheme’s bond holdings. Over both the year to 5 April 2023 and the year to 5 April 2024, there was a significant increase in bond yields. As a consequence, both the Ongoing Target and the Scheme’s assets were lower year on year.
Despite this, the funding level was broadly stable over the period, reflecting the Scheme’s investment strategy, which is designed to closely match the liabilities. The small fall in the funding level over the year to 5 April 2024 reflects the 1 April 2024 discretionary pension increase which was granted by the Company.
When calculating these figures, it is necessary to make certain assumptions about future events. This means that the amount actually needed to provide the benefits — which, for the purposes of calculating the Ongoing Target, include any future benefits granted on a discretionary basis, such as any increases to pensions in payment above statutory requirements — could turn out to be quite different from the figures shown on the previous page.
Results based on the Scheme Solvency Target
In order to better safeguard members’ guaranteed benefits in the unlikely event that the Company were no longer able to support the Scheme, the Trustee uses a funding target called the Scheme Solvency Target. This monitors the funding of the Scheme using slightly different assumptions from those used to determine the Ongoing Target in that they include no allowance for future discretionary pension increases, include a reserve for the projected future administration expenses of providing the Scheme benefits, and allow for a more cautious investment policy to be followed by the Trustee.
The table below shows how the assets of the Scheme’s Defined Benefit Section compared to the Scheme Solvency Target at 5 April 2022, 5 April 2023 and 5 April 2024.
2024
The Scheme’s assets:
£4,359m
The amount needed to provide benefits (liabilities)
£4,048m
The Surplus
£311m
The funding level:
108%
2023
The Scheme’s assets:
£4,775m
The amount needed to provide benefits (liabilities)
£4,419m
The Surplus
£356m
The funding level:
108%
2022
The Scheme’s assets:
£6,650m
The amount needed to provide benefits (liabilities)
£6,145m
The Surplus
£505m
The funding level:
108%
2021
The Scheme’s assets:
£7,207m
The amount needed to provide benefits (liabilities)
£6,632m
The Surplus
£575m
The funding level:
109%
2020
The Scheme’s assets:
£7,714m
The amount needed to provide benefits (liabilities)
£7,127m
The Surplus
£587m
The funding level:
108%
Similar to the Ongoing Target, the funding level has been broadly stable, with both the Scheme Solvency Target and the Scheme’s assets reducing in value over the years to 5 April 2023 and 5 April 2024 as a result of the increases in bond yields in both years.
Future contributions for the Company
The results of the 5 April 2023 Actuarial Valuation showed that, at that date, the Scheme expected to have sufficient assets to provide existing benefits under both the Ongoing and Scheme Solvency Targets. Based on the position as at 5 April 2023 there was therefore no requirement for the Company to make contributions to the Scheme above the minimum required under the Scheme Rules.
The next formal funding investigation (Actuarial Valuation) is due to be carried out at 5 April 2026.
As part of that process, the Trustee and the Company will again look at how the Scheme should be funded in the future and decide whether any changes are required to the approach adopted for the 2023 review or to the rate of contributions payable.
This assessment could, depending on the approach adopted, show a different position to that based on the principles and assumptions consistent with those used in 2023.
Your next Summary Funding Statement will report on the outcome of the annual funding update as at 5 April 2025.
Your questions answered
How is my pension paid for?
The money held to pay for members’ pensions, together with contributions being paid by the Company, is held in a common fund. It is not held in separate funds for each individual. This common fund is invested by the Trustee and any proceeds go towards providing members’ benefits.
How is the amount of money the Scheme needs worked out?
The Trustee obtains regular updates from the Scheme Actuary on the amount of money needed to provide the benefits built up by members (based on certain assumptions as described by the Statement of Funding Principles). The contributions to be paid are agreed between the Trustee and Company having considered the results of these updates. The Trustee’s objective is to have enough money in the Scheme to pay pensions now and in the future. However, the ability of the Scheme to do this depends upon the Company’s continued support. In the event of a shortfall in funding, the Company will usually need to pay in more money to make up the difference along with the future expenses of running the Scheme. There has not been any payment to the Company out of Scheme funds since the date of the last Summary Funding Statement.
In certain circumstances, The Pensions Regulator has powers to intervene in a scheme’s funding plan, by changing the future accrual of benefits, setting the level of the funding target, setting the terms of the recovery plan and/or imposing a schedule of contributions. The Pensions Regulator has not used any of these powers in relation to the Scheme.
What would happen if the Scheme started to wind up?
If the Scheme were to start to wind up, the Company would be required to pay enough money into the Scheme to enable members’ benefits to be provided by an insurance company. Neither the Trustee Directors nor the Company have any plans to wind up the Scheme. However, by law, we are required to let you know the Scheme’s financial position if this were to happen.
Based on the Actuary’s statutory estimate of solvency, which estimated the cost in the market of settling the liabilities through the purchase of annuities, the funding level of the Scheme was 113% as at 5 April 2023.
If the Scheme was wound up in the future at a point at which there was a deficit against the relevant solvency measure and the Company could not afford to make good that deficit, you might not get the full amount of the pension you are entitled to, even if the Scheme were fully funded on the Ongoing Target. The statutory estimate of solvency is only an estimate of the terms that might be available from insurance companies. You may also not receive all your benefits from the Scheme if the insurance companies’ terms at the point of wind up require more funds than are set aside in the Scheme and the Company is not able to make the extra funds available. If the Company became insolvent, the Pension Protection Fund might be able to take over the Scheme and pay compensation to members, but this compensation is likely to be less than the benefits you are entitled to under the Scheme.
Further information and guidance is available on the Pension Protection Fund’s website at ppf.co.uk. You can contact the Pension Protection Fund at information@ppf.co.uk.
Where can I get more information?
If you have any other questions about the Scheme’s funding, please contact the Pensions Manager. You can find contact details in the ‘Contacts’ section of the Scheme website. If you want to find out more about the Scheme, you can also ask for copies of the following documents:
The Schedule of Contributions
This shows how much money is being paid into the Scheme.
The report on the Actuarial Valuation
This shows the results of the Scheme Actuary’s health-check on the Scheme’s financial position on 5 April 2023.
The Annual Actuarial Report
This shows the results of the Scheme Actuary’s funding update on the Scheme’s financial position on 5 April 2024.
The Trustee’s Report and Accounts
This shows the Scheme’s income and expenditure in each year ending 5 April.
Don’t forget that the dedicated website prudentialstaffps.co.uk contains a lot of useful information about the Scheme and the benefits it provides. The website also holds a number of the documents mentioned on the previous page. You can also log into MyPension, the secure area on the website, to see details of your benefits within the DB Section.
The Trustee hopes that you have found this Statement useful and that it gives you a good picture of the Scheme’s funding. As membership of the Prudential Staff Pension Scheme is such a valuable and important benefit, please make sure that you speak to an independent financial adviser if you are thinking of leaving the Scheme (for any reason) before taking any action.
Contacting the DB Section Administrator
You can contact the DB Section Administrator by:
Email:
PSPSDB@xpsgroup.co.uk
Website:
prudentialstaffps.co.uk
Address:
Prudential Staff Pension Scheme XPS Administration
Priory Place
New London Road
Chelmsford
CM2 0PP
Telephone:
01245 673515 (UK callers) (44) 1245 673515 (Overseas callers)
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