News relating to the SOCPF or pensions in general.
Valuation: the SOCPF is 99% funded
Every three years we carry out a detailed actuarial valuation of the Fund. We work closely with the Actuary to carry out an in-depth analysis of future benefit payments from the Fund – the liabilities - which are then compared with the assets to check the Fund is properly financed. This tells us if we have enough money to pay the pensions that have already been promised or if the Company needs to make further contributions to the Fund. This full actuarial valuation was completed as at 31 December 2020.
You may remember from the Source last year that the funding level of the Fund as at 30 September 2020 was 87% with a shortfall of £708m. We are pleased to announce that the results of the full actuarial valuation showed that the funding level recovered well from the lower position experienced earlier in 2020. As at 31 December 2020 the SOCPF was 99% funded, equating to a shortfall of £47 million. This improvement in the funding level is due to a combination of increases in the value of the Fund’s assets, changes to forecasts for inflation, interest rates and salary growth and latest indications of member behaviour and longevity.
Ahead of finalising the actuarial valuation, from January 2021 the Company increased what it pays into the Fund from 30% of members’ pensionable salaries to 55% of members’ pensionable salaries. This increased contribution rate, together with expected investment returns on the Fund’s assets, shows the Company’s commitment to provide security for your pension now and in the future and means that the Fund is very well placed to deliver the benefits promised to members.
More information on the three yearly actuarial valuation will be reported in the Source later in 2021.