Not-for-profit employers should review their strategies in light of Growth Plan 2023 triennial valuation results – LCP
Pensions & benefits Strategic journey planning
The latest triennial valuation of the TPT Growth Plan reveals significant funding improvements on ongoing and exit measures, and LCP is urging employers to use this opportunity to review their risk reduction options.
The Growth Plan would have declared an ongoing surplus of £3m if not for the introduction of a new £19m expense reserve. As a result, employers are still required to make deficit contributions, albeit at a reduced level. On average, employer contributions will generally be around 15% lower than present levels.
Over the next three years, employers are effectively being asked to cover both ongoing Plan expenses and an additional £2.1m annually to build up a reserve towards future Plan expenses from 2028. At the same time, the Plan has “re-risked” its investment strategy and is now targeting an increased level of investment returns.
Exit debts have fallen significantly over the past few years, with some employers seeing reductions in exit payments of up to 75%, meaning that exiting is now a realistic option.
Damian Bailey, Principal at LCP, commented: “It is clearly positive news that the funding position has improved, even if the introduction of an expense reserve means that the typical employer will see their overall contributions continue with only a modest reduction from current levels. The recent reductions in exit debts present an opportunity for organisations to reconsider their options and potentially de-risk their pensions exposure at a significantly lower cost than we have got used to over the last decade.”
Mike Richardson, Partner and Head of LCP’s Social Housing Practice said: “These latest Growth Plan results present an opportunity for employers to check that their pensions strategy continues to fit in with their charitable objective. There is additional uncertainty caused by the ongoing TPT court case and benefit review, and this means employers will need to think carefully to understand what additional exposure they might have if the court case goes against TPT.”
