Updates to the valuation method – a more cautious approach
The Trustee is required to adopt a prudent approach when assessing the Scheme’s funding position. However, the level of caution applied can vary between valuations, depending on the circumstances at the time. For the 31 December 2024 valuation, the Trustee and the employers agreed to include additional elements of caution when valuing both the assets and liabilities, as follows: • Liabilities: It was agreed to use more conservative assumptions for future experience when valuing the liabilities. This had the effect of increasing the value of the liabilities by £21 million. • Assets: A more cautious valuation was applied to the Scheme’s Asset Backed Contribution (ABC) asset. The ABC is a funding arrangement under which the parent company of the Scheme’s
sponsoring employers (RTX) commits to make payments over time. However, these future payments are only due to the extent that they are needed to put the Scheme in a position whereby it can afford to secure members’ full benefits with an insurance company. Given the improved funding position, the likelihood of needing these future payments has reduced. As a result, the Trustee has prudently assigned a lower value to the ABC asset, even though the underlying agreement remains unchanged. This adjustment reduced the reported value of the Scheme’s assets by £62 million. These changes were introduced to simplify the Scheme’s regulatory reporting and help reduce associated costs.
Valuation results allowing for the updated, more cautious approach The table below presents the results of the 31 December 2024 valuation allowing for the updated, more cautious approach. For context, it also includes the results from the previous valuation (31 December 2021) and the 2024 valuation using a methodology that is consistent with the 2021 valuation.
Valuation date
Valuation 31 December 2021
31 December 2024 (consistent approach)
31 December 2024 (updated approach)
Assets
£2,535m £2,288m
£1,479m £1,287m
£1,417m £1,308m
Liabilities
Surplus
£247m
£192m
£109m
Funding level
111%
115%
108%
Under the updated approach, the Scheme’s funding level is 108% at the valuation date. While this is lower than at the previous valuation, it’s important to re-iterate that this doesn’t mean the Scheme is worse off. In fact, the opposite is true: the Scheme’s funding level has improved on a like-for-like measure, as shown by the ‘consistent approach’ results above. We also wrote to you last year with an interim update on the estimated funding position as at 31 December 2023. For completeness, over the year to 31 December 2024, the funding level improved from 107% to 108%. This slight improvement was primarily caused by Scheme experience being more favourable than the prudent assumptions used by the Trustee.
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