How do we value our large DB plans?



Today’s Pension Play Pen lunch (at the Hydrant pub not the Counting House) will discuss how best we value our large DB plans.

What do we mean by large DB plans?

I guess there are a number of big DB schemes that we could discuss….

How about the PPF, which claims to be on a path to self-sufficiency but which many believe is already there! Is it pleading poverty to get its levy or is its very conservative valuation methodology necessary?pension protection fund

How about British Steel- probably the best run pension scheme in the land, which is closing its doors and re-opening as BSPS2 for members who want to avoid going into the PPF. Was all the fuss really necessary, could BSPS1 have soldiered on and paid its benefits had it not been treated (for valuation purposes) as a basket case?Tata workers

Then there’s Royal Mail, whose pension scheme was topped up only a few years ago to be fully solvent but which closed for future accrual in 2017, triggering considerable unrest among its members. Continuing to accrue in the old scheme’s gilt-heavy investment structure would have cost 52% of salary. Royal Mail don’t want to offer their membership a “wage in retirement” as they say this is too risky. Instead – they want to offer members cash at retirement so they can be free!  Have we valued Royal Mail out of pensions?Royal Mail 4

Oh and let’s not forget BHS which has become a cause celebre for Frank Field and the DWP select committee. Like BSPS’, its membership are being kicked out of BHS1 into either a weaker BHS2 or the PPF. Was all the fuss about a bust pension scheme, or just a tra-la-la about a weak employer covenant.

A woman walks past a BHS store in Leicester

Last but by no means least, we’ll be discussing the mighty University Superannuation Scheme, which is – according to the bearded wonder – on the rocks. That’s if you value it on a gilts + basis where there is a socking -great deficit. But the fund isn’t invested in gilts and as its report and accounts confirms, if the fund was valued using a discount rate reflecting the expected performance of the actual assets, it would have a £3.5m surplus.uss3

Indeed, using a best estimates approach to valuing pension schemes, albeit an approach that assumed that people actually wanted pensions and trustees were prepared to pay them, then  all the above mentioned schemes would look a whole lot healthier!

Accountants welcome!

I hope for a very diverse discussion, it would be great to have advocates for the gilts plus valuation method and for best estimates. Obviously I am biased, I work for First Actuarial which produces #FABI, the best estimate index but I’ll be in the independent chair. So if you’re sitting at your desk in one of our big pension consultancies or if your name is John Ralfe, get down to the Monument for 12.30!

Calling time on willy-waggling!

I also want this to be more than willy waggling- we want some female in the room – which as we all know is emotionally astute and usually right! Please ladies – come along!

Bigging up da yoof!

I’d love to see some young people – (e.g. under 40) in the room. Pensions cannot become an old soaks preserve. We need those who are currently denied the security of DB to be wise to both its faults and its merits. We can’t let DB go the way of rare-breed pigs. I don’t want a scheme pension being paraded around the financial services showground in 2050 as a curiosity!

DB virgins come on down!

Finally, I’d like to see people who know nothing at all about discount rates, DB valuations and the dynamics of scheme funding in the room! We need some common sense. We are all scarred with some kind of prejudice. We need some DB virgins!


It’s not the Counting House, it is the Hydrant pub where we are meeting.

Follow this link for directions – it’s right by Monument station.

If you go to the Counting House, you will meet a bunch of builders; the place is being redecorated, I will try to get a redirection service at the door if your habitual satnav takes you there – but think Hydrant!

We meet 12 for 12.30 and we’ll wrap up by 1.45 with networking after. The bill will be divided as usual, be prepared for a £15-20 hit to the pocket though you can opt-out if you are skint or don’t want to cross-subsidise the dipsomaniacs!



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in Pension Freedoms, pension playpen, pensions, Pensions Regulator and tagged , , , . Bookmark the permalink.

3 Responses to How do we value our large DB plans?

  1. henry tapper says:

    Thanks to everyone who made this such a memorable lunch!

  2. Mel Duffield says:

    Henry, delighted to see you encouraging women to lunch to offset the “willy waggling”, but making sweeping tongue in cheek comments about emotional astuteness and women “always being right” may not be the best way to do it. Also, with the gender pay gap reported as it is, maybe women don’t have time for these extended “working” lunches on company time, we’re busy making up for the hours we don’t get paid for when we should be down the golf course.

  3. henry tapper says:

    Good points Mel! Though we do hold our lunches in the City and they are focussed on business issues. We had fifteen people at the Hydrant Lunch and fourteen at the Counting House lunch yesterday. Those who come report them to be helpful, they have been running for nearly ten years and I try, as far as possible , to allow people to leave and join as they please- so we don’t impact on company time!

    As regards diversity, the standard of discussion is always improved by diversity. As Chair I know that it is easier to manage a room where we are not all men. So please come along to our next one, I know your office isn’t far away!

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