Purpose of scheme funding negotiations

Funding negotiations usually take place between pension scheme Employers and the trustees who manage schemes. Trustees and sponsoring employers are usually required to agree the following funding matters:

1. •

   the valuation of a defined benefit (DB) scheme’s assets and liabilities on a scheme-specific basis (or to be more accurate, the methods and assumptions to be used in calculating the scheme's ‘technical provisions’)

2. •

   the statement of funding principles. This is effectively a written statement of the trustees’ policy on how to achieve the statutory funding objective

3. •

   if the scheme valuation reveals that the statutory funding objective was not met on the effective date (ie that the scheme’s assets are less than its liabilities, as calculated on a scheme-specific funding basis), the recovery plan

4. •

   the schedule of contributions. In broad terms, this sets out the contributions that the employer will be required to pay to the scheme in the future

5. •

   for scheme valuations with an effective date on or after