Eileen joins the firm with extensive experience in pensions operations and programme management. Over her career, she has led complex scheme transitions and transformation projects for both private and public sector clients, ensuring seamless delivery, governance, and member outcomes.

In her new role, Eileen will oversee all aspects of scheme onboarding and transition management, working closely with clients and internal teams to ensure effective implementation of new schemes and services. This appointment reinforces Spences’ commitment to operational excellence and its continued investment in specialist leadership across key areas of its business.

Scott brings strong technical expertise and a sustained commitment to high service standards, supported by almost 17 years’ experience within the pensions industry.

He has worked across a diverse portfolio of Defined Benefit (DB), Defined Contribution (DC) and CARE pension schemes, covering a wide range of benefit structures and levels of complexity. Scott’s experience includes supporting day-to-day administration alongside the resolution of complex technical and benefit queries, ensuring accurate and timely outcomes for members and trustees.

In his new role, Scott will play a key role in supporting Spence’s administration teams, helping to maintain consistent, high-quality service delivery across the firm’s client schemes.

Commenting on the appointments, Alan Collins, Managing Director at Spence & Partners, said: “We’re thrilled to welcome Eileen and Scott. Both bring extensive industry expertise and proven track records. Eileen in driving operational transformation, while Scott’s experience in leading p pensions administration will strengthen our day-to-day delivery. Their appointments will be invaluable as we continue expanding our client base and enhancing our member experience.

Eileen added: “Spence has an outstanding reputation for innovation and service quality. I’m excited to lead the scheme implementations function and contribute to delivering exceptional outcomes for our clients and scheme members.”

Scott commented: “Joining Spence is an excellent opportunity to build on my experience in leading pensions administration within a forward-thinking environment. I’m looking forward to contributing to the team’s continued growth and service quality.”

About Spence & Partners
Spence is focused on service excellence for employers and trustees operating DB pension schemes. Our clients range from large UK PLCs and Government bodies to small-to-medium sized employers and charities.  

Spence is on a mission to simplify the delivery of pensions. Our approach takes friction out of the supplier chain and gives members a better experience. We automate 100% of benefits and our combined administration, actuarial and accounting system (Mantle) makes accurate information available to the Trustee and other stakeholders when and how they need it.   

The post Spence & Partners Strengthens Team with Two Key Appointments appeared first on Spence & Partners.

Iran’s response to the US and Israeli attacks has been broader than in previous instances, such as the 12-day war in June last year. Key energy infrastructure is being targeted by Iran, most notably the Strait of Hormoz. This is a crucial shipping channel responsible for around 20% of global oil and gas supplies, as well as other commodities such as fertiliser and aluminium.

Oil prices have risen around 14% since Friday, at the time of writing. Global equity markets fell roughly 1.6% across Monday and Tuesday but have stabilised somewhat on Wednesday. However, equity markets in countries that rely on Middle Eastern oil imports, notably South Korea and Japan, have fallen further. Global government bond yields have generally edged higher, as concerns around high energy prices have pushed up interest rate expectations, given the potential impact on inflation.

If the sharp rise in commodity prices proves short lived, the impact on inflation should be limited, and central banks are likely to look through a temporary spike. However, if there is a longer-term conflict, with the Strait of Hormoz closed for an extended period, energy prices could remain elevated. This could lead to an increase in inflation expectations and weigh on global growth, posing a greater challenge for central banks and potentially delaying interest rate cuts.

Spence View

We believe that amid uncertain geopolitical conditions, pension schemes should remain well diversified to navigate the broader market volatility. We believe that it is too early to determine whether this will be a short-term conflict or potentially develop into a longer-term conflict, so our clients should not panic, and avoid making immediate strategic asset allocation changes. Instead, we believe the shorter-term tactical calls should be left to the underlying active fund managers.

There is limited direct exposure to energy within global equity markets, with the sector representing around 3% of the global index, although it accounts for closer to 10% in UK equities. We believe the main risks are more the second-order effects of sustained high energy prices on inflation and economic growth.

We will continue to monitor the situation, and please do let us know if you have any questions in the meantime.

The post Investment Market Update appeared first on Spence & Partners.

Still, even with its robust structure, many people misunderstand how DB schemes actually work. A clear understanding of DB pension schemes helps both members and employers make better decisions about funding, retirement planning, and risk management.

Here, we set the record straight on 10 common beliefs about DB pension schemes and explain what they really mean for you. Whether you are a member, trustee, or sponsoring employer, knowing the facts can help you protect value and plan confidently for the future.

What is a DB pension scheme?

A Defined Benefit (DB) pension scheme is a workplace plan where your retirement income is based on a fixed formula, which is usually:

Pension = Accrual rate × Years of service × Pensionable salary

The accrual rate (such as 1/60th or 1/80th) defines how much of your salary you build up as pension each year. Unlike a Defined Contribution (DC) scheme, where your pot depends on investment performance, the employer in a DB arrangement bears the investment and longevity risk. Members receive a predictable income for life, usually with inflation increases.

Although many private sector DB schemes are now closed to new entrants, around 5,000 remain active in the UK, according to The Pensions Regulator in 2024. DB pensions continue to play a significant role in supporting millions of members and pensioners.

Why it’s important to understand your DB pension scheme

Whether you are drawing benefits or managing one, a DB pension scheme is arguably complex. Knowing how it works can help you:

• Check that member communications are clear and accurate.
• Plan retirement income and taxation more confidently.
• Understand how funding, governance, and protection mechanisms interact.

At Spence, we help trustees, employers, and members navigate these details through clear communication and practical management advice.

10 DB pension myths, debunked

1. My DB pension income is guaranteed forever – without conditions.

Mostly true – but with important caveats.

A DB pension provides a lifetime income under the scheme’s rules. The guarantee depends on the scheme’s funding position and the employer’s ability to meet obligations. If the sponsoring employer became insolvent and the scheme could not meet promised benefits, the Pension Protection Fund (PPF) would usually step in to provide compensation. The PPF typically pays 100% of benefits for pensioners already in receipt and 90% for deferred members within set limits.

So yes, a DB pension is highly secure, but it still relies on careful funding management and regulatory oversight.

2. Every DB pension is a final salary scheme.

False.

There are two main types of DB structure:

1. Final Salary: Pension based on your salary near retirement.
2. Career Average Revalued Earnings (CARE): Each year’s earnings are recorded and revalued with inflation until retirement.

CARE schemes are now more common because they align benefits more closely to modern career patterns. If you are unsure which design applies, check your scheme booklet or contact your administrator.

3. The scheme’s actuary sets how much I’ll get.

False.

The actuary’s role is to calculate the scheme’s liabilities and help trustees determine whether the fund has enough money to pay promised benefits. The actuary doesn’t decide your personal pension amount, because that’s defined by the scheme’s rules and your individual service and pay history.

The actuary’s funding advice, however, helps trustees and employers ensure those benefits remain secure.

4. If I retire early, my DB pension won’t change.

False.

If you take your pension early, typically before your Normal Pension Age (NPA), your pension is likely to be reduced. This reduction reflects that the income will be paid for longer. Each scheme applies different factors, so it’s worth checking your rules or asking for an early retirement quotation.

Some employers also allow flexible retirement, letting you draw some pension and continue working. Understanding your scheme’s flexibility can support better workforce and personal planning.

5. My DB pension keeps up fully with inflation.

False, but it is inflation-protected to an extent.

Most DB pensions rise each year in line with inflation, such as the Consumer Prices Index (CPI), but the increase is usually capped, for example, 2.5% or 5% depending on when the benefits were earned. This statutory protection helps maintain purchasing power without putting unlimited pressure on scheme funding.

6. If my employer fails, I’ll lose everything.

False.

As explained above, if the sponsoring employer becomes insolvent and the scheme cannot afford its benefits, the PPF provides compensation. While not always identical to the original promise, this protection ensures the vast majority of members continue receiving a secure income.

Trustees and employers are also required by law to maintain “a statement of funding principles” and recovery plans to reduce any deficit over time.

7. I can take all my pension as a lump sum if I want.

False.

Most DB schemes allow members to take up to 25% of the total value (within HM Revenue & Customs limits) as a tax-free lump sum when starting their pension. The rest must be taken as a taxable regular income.

Taking more than this generally means transferring your DB benefits into a Defined Contribution (DC) arrangement, which carries significant implications and requires regulated financial advice for transfer values above £30,000.

8. Transferring out would always give me better returns.

False, and often financially risky.

Transferring a DB pension to a DC scheme trades a guaranteed, inflation-linked income for investment uncertainty. The Cash Equivalent Transfer Value (CETV) represents the current cost of providing your future income, but markets fluctuate, and the new arrangement exposes you to investment and longevity risk.

For many people, staying in their DB pension provides greater long-term security. Independent advice is mandatory for larger transfers and strongly recommended for all.

9. The government guarantees every DB pension payment.

False.

The UK Government directly guarantees the benefits of public sector schemes, such as the NHS and Teachers’ pensions. For private sector DB schemes, the guarantee instead stems from employer covenant, scheme funding, and the PPF safety net, regulated by The Pensions Regulator (TPR).

So while DB pensions are highly protected, they are not backed by the government in all cases.

10. DB pensions aren’t affected by tax.

False.

Your DB pension income is subject to UK income tax after any tax-free lump sum is taken. In addition, high earners may face annual or lifetime tax allowance considerations (now simplified following 2023 changes).

Members should seek advice on how DB pension income interacts with other sources of retirement income to avoid unexpected liabilities.

How to successfully manage a DB pension scheme

Running a DB pension scheme demands collaboration between trustees, employers, and specialist advisers. Each has defined responsibilities:

Spence supports all of these roles through a unified approach combining professional expertise, transparent communication, and modern technology.

What trustees and employers can do now

If you manage or sponsor a DB pension scheme, consider:

• Conduct a data and benefits audit to ensure member records and calculations are accurate.
• Review the scheme funding and investment strategy in light of recent market conditions.
• Assess governance processes to confirm they meet standards set by The Pensions Regulator (TPR).
• Plan for long-term outcomes, whether buyout, consolidation, or sustainable run-off.

At Spence, we support trustees, employers, as well as members by:

• Developing funding and investment strategies grounded in real-time data.
• Providing actuarial valuations and risk modelling through Mantle.
• Offering full administration, record-keeping, and member communication.
• Facilitating transitions, such as buy-ins, buyouts, or wind-ups, efficiently and transparently.

Our aim is to make pensions feel less complex and more manageable. By combining people and technology, we help you protect scheme value, reduce risk, and enhance outcomes for everyone involved.

If you are a trustee or employer seeking pragmatic advice on funding, governance, or member engagement, Spence can help you design a smarter, more secure future for your DB pension scheme. Contact us today.

The post 10 Common Myths About DB Pension Schemes, Debunked appeared first on Spence & Partners.

Highlights include:

• Superfunds stepping into the spotlight through Pension Schemes Bill

• AI: Can actuaries r-AI-se the bar?

• Identity verification with Companies House

Our report is aimed at trustees and sponsors of pension schemes. It combines brief written comment topical issues with links to any further relevant information and any deadlines you should be aware of.

We trust you will find this update useful and informative. If you require further information about how any of the topics covered might impact on your scheme specifically, please get in touch with Alan Collins or your usual Spence contact. Read the report here.

The post Quarterly Report for Q3 2025 appeared first on Spence & Partners.

Salary sacrifice schemes are voluntary workplace agreements that reduce an employee’s entitlement to an agreed level of cash pay. In return, the employer is then able to pass back a non-cash benefit to employees to enrich their working experience.

Forthcoming tax reforms, including a salary sacrifice cap from April 2029, may affect how workplace benefits and pension contributions are structured. Understanding how they work, as well as how they might affect employee pension savings, has never been more important.

How does salary sacrifice work?

Salary sacrifice, also sometimes known as a salary exchange, is the voluntary surrender of part of an employee’s gross salary in favour of a benefit. Salary sacrifice agreements must be clearly laid out in an employee’s contract.

Voluntary agreement

The first step of a salary sacrifice scheme will be a discussion about what the exact reduction will be. Pension contributions are the most common types of sacrifices offered, and the employer needs to ensure they are working with the right pension partner to ensure this is adequately accommodated. In addition to the exact purpose, the full deduction needs to be agreed upon between the employer and employee.

Salary reduction

The employees pay will then be reduced by the agreed amount. This often results in the employee owing less income tax than they would on the higher amount. Sacrificed salary is not subject to employer or employee national insurance, so employers and employees alike will usually benefit from a saving.

For example, if an employee earns an annual salary of £51,000 and agrees to sacrifice £5,000 into a pension, their contractual salary would reduce to £46,000. However, from April 2029, National Insurance savings generated through salary sacrifice will be capped by the £2,000 salary sacrifice cap. This means that while the employee’s taxable salary is still reduced, any savings above the £2,000 cap will not attract further National Insurance relief. As a result, the employee may see a smaller increase in net take-home pay than under current rules.

What are the advantages of salary sacrifice arrangements for employers?

Salary sacrifice carries a range of benefits for employers. If you are considering introducing such a scheme for your employees, you could see the following advantages coming your way:

Cost-saving

When undertaken correctly, a salary sacrifice scheme will bring several cost-saving benefits to a company. By exchanging taxable income for non-cash benefits, both employers and employees reduce their National Insurance liabilities.

Increased employee satisfaction

A good paycheque isn’t enough for most employees. They want to be paid what they feel they are worth, but they also want to ensure that they get a good selection of benefits alongside their base pay. When employees are satisfied with their current benefits package, this will translate into their work through boosted productivity and engagement.

Talent attraction and retention

A robust benefits package, including good base pay and reasonable salary sacrifices, will be attractive to both current and potential employees. With these strong incentives, new talent will want to join your company, while current employees will want to stay with you and develop their skills and careers further.

What are the advantages of salary sacrifice schemes for employees?

As with any scheme in the workplace, employees need to see and understand their tangible benefits to opt in. You can have what you perceive to be the best benefits in the world, but if employees do not understand the value in them, they will never choose to opt for them. Employees can gain the following benefits through salary sacrifice schemes:

Tangible benefits

Some benefits are small intangible things behind the scenes that employees may not notice, even if they actively improve their experiences at work. High-value items, such as technology or bicycles, that may otherwise be unaffordable can be great perks that can make a real difference in their lives. New laptops, bikes, and mobile phones are all options that employees will truly appreciate.

Cost saving

The cost-saving aspects of salary sacrifice are not just for employers. Allowances for childcare, the latest tech, and other financial burdens can help to make these large costs a lot easier to manage. On top of this, the reductions in gross salary from sacrifice schemes will reduce their taxable income, therefore meaning they may have less tax and lower National Insurance contributions.

Futureproofing

Retirement can be a worry for many. A salary sacrifice arrangement can help employees put more towards their pensions, thus helping them build towards having adequate retirement savings.

Improved health and well-being

The right saving schemes can lead to an improvement in health and well-being throughout a company. Any stress about money can lessen, and this can lead to overall better health and well-being patterns.

Will the new cap on salary sacrifices affect pension savings?

In November 2025, the Chancellor, Rachel Reeves, confirmed changes to the tax treatment of salary sacrifice arrangements. As part of these reforms, a £2,000 annual cap on pension salary sacrifice schemes will be imposed from April 2029.

At the moment, companies do not pay a 15% employer National Insurance contribution on pension contributions made via salary sacrifice. From April 2029, however, the value of these National Insurance savings will be restricted by the £2,000 annual cap. Beyond this threshold, salary sacrifice will no longer deliver the same level of National Insurance efficiency for either employers or employees.

Under the new framework, and based on current (2025/26) National Insurance rates and bands, employees earning under £50,000 will face National Insurance at 8%, while those earning above £50,000 will pay 2% on amounts exceeding the cap. As a result, lower earners will be affected alongside higher earners.

With the salary sacrifice cap confirmed to take effect from April 2029, employers should begin preparing now by reviewing existing salary sacrifice agreements, pension contribution structures, and employee communications. Early planning will allow employers to manage any cost impacts, maintain engagement with pension saving, and ensure compliance once the new rules come into force.

Get your employee pensions in order with Spence & Partners

As an employer, you have the responsibility to ensure that your pension scheme offers the clearest information to employees. Increasing regulation and compliance risks put pressure on businesses to deliver the right schemes and support for all. With regulations and taxation due to change shortly, now is the time to gather expert advice and ensure your pension schemes are all in order.

Start a conversation with us today to optimise your current pension administration and give your employees the support they need, with or without salary sacrifice.

The post What Is Salary Sacrifice? appeared first on Spence & Partners.

Valuation results

The results we’re seeing come through are showing a very significant increase in the funding level for employers – often around 20%.  Funds have larger surpluses than in 2022.  This has primarily been driven by yield rises since 2022 increasing future investment return expectations and reducing liabilities.

This is translating through to lower employer pension contributions from April 2026 onwards.  In one example, we’ve seen the employer contribution rate reduce from over 30% of salaries to 20% of salaries.

However, the reduction in employer contributions can sometimes be lower than you might expect given the improvement in funding.  Funds try to keep contribution rates stable over time, and are cognisant of the risk of current surplus levels deteriorating in the future.

Top tips

If you want to challenge the level of contribution proposed by your Fund or better utilise your current level of LGPS surplus, consider the following points:

1. Understand your fund’s policy on exit credit payments.  You might be more relaxed about continuing to pay contributions into a well funded arrangement if you have certainty that any over-funding will be refunded with an exit credit payment on eventual cessation. But funds have discretion over this, so understanding how they will apply this discretion in your circumstances is crucial.  If you don’t have certainty that you will recover any over-funding, then it’s more important that you don’t overpay contributions now.
2. Check the time horizon being used by the fund. With strong funding positions, longer time horizons can increase cash costs because the risk of returning into deficit over the time horizon increases.  Shorter time horizons could reduce your cash costs, and may be justifiable depending on your membership profile.
3. Consider exiting to crystallise the current surplus levels.  Contributions are typically set assuming ongoing participation in the fund, and therefore build in the risk of surpluses reducing in the future, thereby meaning current surplus levels are not fully recognised.  Exiting the fund crystallises current surplus levels, and can lead to exit credit payments to employers.

A closing thought on initiating an LGPS exit

Exiting your Fund is triggered when your last employee leaves pensionable service in the Fund.  Accessing an exit credit therefore requires your LGPS employees to be moved to another pension arrangement for future pensionable service.  Employee relations issues can be a concern here, particularly if the employees have a contractual entitlement to an LGPS pension.  One option to consider for managing this is to offer DB rather than DC as the replacement pension.  The same yield rises that have improved LGPS funding positions have materially reduced DB contribution rates in other DB schemes.  From an employee perspective, a non-contributory 60ths DB scheme is broadly equivalent to the contributory 49ths DB pension they receive in LGPS.  Moving the employees to another DB scheme can therefore be a neat way to negate the employee relations issue whilst still accessing the LGPS surplus.  This won’t be right in all circumstances, particularly for smaller employers without other DB, but if you have access to another DB scheme it might just be worth considering.

To hear more about your options, join Alistair at our latest webinar on Tuesday 11th November at 11.30am – register here.

The post Bulletin 63 – LGPS valuations in England & Wales appeared first on Spence & Partners.

In November 2024, Chancellor Rachel Reeves announced plans to create large pension “megafunds” by consolidating existing pension schemes. This initiative aims to unlock up to £80 billion for investment in UK infrastructure and businesses, addressing the under-investment issue that has historically hampered economic growth. The government believes that larger funds will be better equipped to make significant investments, drive economic growth and enhance retirement savings. ​

However, this proposal has faced criticism from some quarters. Pension managers have raised concerns that mandating minimum scale requirements for pension schemes could reduce competition, hinder innovation, and lead to suboptimal financial performance. They argue that scaling benefits should arise naturally through careful selection and evolution, rather than being enforced.

One existing way that schemes can capture the advantages of consolidation are Defined Benefit Master Trusts. They have existed for decades but maybe the current environment means they will appear more often as a credible option for scheme’s long-term planning.

The Pensions Regulator (TPR)

The Pensions Regulator (TPR) has expressed support for the consolidation of DB schemes, viewing it as a means to strengthen the resilience of pension funds and improve investment capabilities. In its 2024 Annual Funding Statement, TPR noted that well-funded DB schemes have various options, including targeting surplus generation, consolidation, or buy-out with an insurance company. The statement highlighted that larger, consolidated schemes are better equipped to invest in the UK economy, potentially offering better value for savers and supporting higher standards and innovation within the market. ​

Benefits of Defined Benefit Master Trusts

A Defined Benefit (DB) Master Trust is a pension scheme that pools multiple employers and their members into a single trust arrangement, allowing them to benefit from economies of scale, operational efficiencies, and robust governance. DB Master Trusts are becoming an increasingly popular option for employers and pension plan sponsors, providing notable benefits to all parties involved – members, sponsors and trustees. Below, we explore these advantages in detail.

Benefits for Members

DB Master Trusts can provide higher-quality member support services compared to individual schemes. Since these trusts pool resources from multiple employers, they often have greater bargaining power when it comes to negotiating services. This typically results in more efficient administration and higher-quality service, which benefits members by ensuring that their pension is well-managed and that they receive more value and better technical support.

Moreover, members benefit from professional governance and management within DB Master Trusts. The involvement of experienced trustees and fiduciaries ensures that pension assets are managed in the best interests of members, enhancing both the security and value of their pensions.

Benefits for Sponsors

Employers or sponsors of pension schemes can also derive significant advantages from participating in DB Master Trusts. One of the primary benefits is the reduction in administrative and operational burden. Traditionally, managing a DB scheme requires substantial resources to handle actuarial valuations, compliance, funding requirements, and other administrative tasks. By joining a Master Trust, sponsors can shift many of these responsibilities to the trust provider, allowing them to focus more on core business activities.

In addition, DB Master Trusts provide access to economies of scale, which can lead to cost savings for the sponsoring employers. With multiple employers pooling their resources, the overall cost of running the scheme is distributed among all participants, reducing the individual costs for each sponsor. This enables smaller employers, who might not otherwise be able to support a standalone DB scheme, to provide high-quality pension benefits to their employees at a more affordable cost.

There is a perception from a Sponsor perspective that there is a loss of control. However, a Master Trust is similar in Trustee structure to having professional independent trustees or sole professional trustee boards which is the dominant model in the UK already.

What about existing Trustees and their advisors?

Trustees are responsible for overseeing the management and governance of the DB Master Trust, ensuring that it is run in accordance with legal and regulatory requirements. One of the key advantages for trustees is the opportunity to manage a larger, more diversified portfolio of assets, which allows for more sophisticated investment strategies. The economies of scale inherent in Master Trusts allow trustees to access institutional-quality investment opportunities that might be unavailable to smaller, standalone pension schemes.

Additionally, DB Master Trusts provide trustees with greater access to expert resources and advice. The trust’s professional management and governance structures often involve experienced fiduciaries, actuaries, legal advisors, and other professionals, providing trustees with the support they need to make informed decisions and ensure that the scheme is well-governed and compliant with relevant laws.

Trustees also benefit from the collaborative nature of Master Trusts, which brings together a diverse group of employers and members. This diversity can foster more innovative solutions to pension management and help ensure that the interests of all parties are balanced and well-represented.

Conclusion

DB Master Trusts can provide well-governed, large-scale pension schemes with access to high-quality investment opportunities. As the pension landscape continues to evolve, DB Master Trusts present a compelling model for providing secure and efficient retirement benefits over the long term.

The post Advantages of Defined Benefit Master Trusts appeared first on Spence & Partners.

Now the results of the 30 September 2024 actuarial valuation for the Scottish Housing Association Pension Scheme (“SHAPS”) have been finalised and shared with employers, what are the key takeaways?

Deterioration in funding level

While overall Scheme liabilities have reduced significantly – driven by rising gilt yields – the funding level has declined from 98% in 2021 to 90% in 2024. Consequently, the Scheme deficit has increased from £27.3 million to £79.5 million.

TPT has attributed the deterioration primarily to underperformance in the Scheme’s asset portfolio, particularly around the time of the September 2022 mini-budget, which caused widespread market volatility.

Re-introduction of deficit contributions

To address the shortfall, a new recovery plan has been implemented.

• Deficit contributions will be £15.6 million per annum across all employers, increasing by 3% each April. This broadly equates to annual contributions that are around half the level being paid before they turned off in 2022.

• Payments will restart on 1 April 2026 and will be reviewed again at the 2027 valuation. They are currently due to stop on 31 March 2030 but this could be extended if there is adverse experience at the 2027 valuation (most notably if the 2025 Court case leads to additional liabilities).

Employers continue to pay scheme expense

Employers will continue to pay scheme expenses on top of the deficit contributions. The method for allocating expenses across employers is being reviewed, but for the 2024 valuation they have been split in proportion to each employer’s liability share.

Reduction in future service contribution rates

The significant increase in gilt yields between the 2021 and 2024 valuations has also led to a notable reduction in future service contribution rates.

This may be a welcome development for employers continuing to offer defined benefit accrual. However, employers will need to consider how the total contribution rate is shared between employers and employees, particularly in light of ongoing affordability pressures.

Valuation timeline

TPT have also shared an updated timeline for concluding the valuation:

What should employers be doing?

The way in which employers respond to the SHAPS valuation results will depend on individual circumstances, such as whether employees are still accruing SHAPS DB and whether the employer has other DB arrangements such as LGPS. But considerations include:

1. How to fund the recommencement of deficit contributions, and re-shaping of pension budgets to accommodate these deficit contributions? Organisations in well funded LGPS arrangements may want to look at accessing exit credits from these arrangements to fund the SHAPS deficit contributions.

2. How best to split the future service contribution rate between the employer and employees for SHAPS DB future accrual, given the fall in these rates? If employees were asked to pay an increasing contribution as rates went up, it may be appropriate to consider reducing their rate now. However, in contrast the recommencement of deficit contributions funded solely by the employer is arguably a reason for the employer to retain more of the future service savings than employees.

3. Should pension benefits be reviewed? The recommencement of deficit contributions may be a reason to consider turning off DB accrual in SHAPS for those organisations that offer SHAPS DB accrual. Any organisations accessing LGPS exit credits will be turning off DB accrual in LGPS to do this, which may also be a reason to review any remaining DB accrual in SHAPS.

Conclusion

The 2024 SHAPS actuarial valuation highlights a mixed outlook for participating employers. While rising gilt yields have reduced liabilities and future service contribution rates, asset underperformance has significantly worsened the Scheme’s funding position, leading to the reintroduction of deficit contributions from 2026.

Employers will need to plan carefully for the financial impact, balancing the cost of renewed contributions with potential savings and reviewing how these changes affect overall pension strategy. In particular, the valuation presents a timely opportunity to reassess the structure of future pension provision, including the viability of continuing defined benefit accrual.

Contact us today if you’d like to discuss your situation or hear more about your options.

The post Bulletin 62 – SHAPS Valuation 30 September 2024 Results appeared first on Spence & Partners.

Highlights include:

• Capacity challenges in DB pension risk transfers.

• TPR’s Finalised Statement of Strategy: A New Era for DB Scheme Funding

• Mortality Update – latest mortality improvement model

Our report is aimed at trustees and sponsors of pension schemes. It combines brief written comment topical issues with links to any further relevant information and any deadlines you should be aware of.

We trust you will find this update useful and informative. If you require further information about how any of the topics covered might impact on your scheme specifically, please get in touch with Alan Collins or your usual Spence contact. Read the report here.

The post Quarterly Report for Q2 2025 appeared first on Spence & Partners.

New research from Spence & Partners (Spence), one of the leading providers of pensions advisory and data services to pensions schemes in the UK, reveals the DB pension schemes for UK universities non-academic staff could save an average of £230,000 per annum through simplifying governance and improved use of technology and automation.

For the research, Spence has analysed the current running costs of 30 DB schemes for pre-1992 UK universities. These schemes have a combined total of £6.9bn in assets. Most pension provision in higher education is through large multi-employer schemes such as the Universities Superannuation Scheme (USS). However, many of the pre-1992 universities then have their own DB schemes for non-academic staff.

The research shows that funding levels for the pre-1992 university DB schemes have improved dramatically in the last two years with rising Gilt and investment grade corporate bond yields. This has also shrunk scheme liabilities, often by as much as 40%, meaning many schemes are now less of a risk to university balance sheets.

Key developments in the last year include:

• The pensions regulatory environment is encouraging strategies other than insurance buy-out for DB schemes to better deploy the £1.2trn of assets in DB schemes for the UK economy.
• With 70% of university DB schemes still open to future accrual, the run-on opportunity is more significant for universities than many other employers.
• The new funding regime is in place and expects schemes to have a funding plan to reach a ‘low dependency funding basis’. 84% of university schemes are in deficit on this requirement.
• The new funding regime also calls for an expense reserve in some cases. This will mean reviewing costs and processes to effectively manage the expense reserve.

Read the full analysis and discover what actions universities could be taking to respond to these developments.

The post Significant variance in DB pension scheme running costs in Pre-1992 universities – Spence Pre-1992 University Report appeared first on Spence & Partners.