As Trustee, ensuring the UKRF has enough money to pay your benefits is the most important job we have. And because we are managing billions of pounds, a lot of our time is spent checking and managing the Fund’s finances, so we have a good picture of how we are doing.
To do this, every three years we look closely at the figures to see if we are likely to have enough money to pay all benefits due now and in the future. The last full review was done in 2019, and the next one is due in 2022.
In the years in between, like in 2021, we do additional checks, just to make sure our finances are moving in the way we expected them to.
So how did we do this year?
We’re on track to meet our goal
In 2019 we set a goal: to close the then £2.3 billion gap or deficit between how much we have (our assets) and how much we need to pay everyone’s pension now and in future (our liabilities). Our aim was to do this by 2023, following a plan that included a series of Barclays’ contributions and a focused investment strategy.
Two years on, and further to the 2020 Summary Funding Statement, our latest financial check at 30 September 2021 shows that our funding position has improved. In fact, as a result of Barclays’ £0.7 billion contribution in 2021 and another year of strong investment performance, our assets are valued at £0.6 billion more than our liabilities:
A snapshot in time
Our 2021 check confirms that we are moving in the right direction. However, we recognise that our funding level is influenced by things like investment market performance, and that any financial checks we do are a snapshot based on the circumstances at the time.
In practice, our funding level is constantly adjusting. This means that our current small surplus is volatile and there is a chance that our full review at 30 September 2022 may show a deficit.
| As at 30 September | Our Liabilities The value of our liabilities (Technical Provisions) was | Our Assets The UKRF’s assets were valued at | The difference This means there was a difference between Assets and Liabilities of |
|---|---|---|---|
| As at 30 September2019 | Our Liabilities The value of our liabilities (Technical Provisions) was£38.3bn | Our Assets The UKRF’s assets were valued at£36.0bn | The gap This means there was a deficit of- £2.3bn |
| As at 30 September2020 | Our Liabilities The value of our liabilities (Technical Provisions) was£37.7bn | Our Assets The UKRF’s assets were valued at£36.8bn | The gap This means there was a deficit of- £0.9bn |
| As at 30 September2021 | Our Liabilities The value of our liabilities (Technical Provisions) was£36.6bn | Our Assets The UKRF’s assets were valued at£37.2bn | The gap This means there was a surplus of£0.6bn |
Which means the Fund is in surplus
| As at 30 September | 2021 | 2020 | 2019 |
|---|---|---|---|
| As at 30 SeptemberSurplus (+) or deficit (-) | 2021+ £0.6 billion | 2020- £0.9 billion | 2019- £2.3 billion |
| As at 30 SeptemberUKRF funding level | 2021101.7% | 202097.5% | 201994.0% |
A funding level of 100% or more means that the Fund’s assets should be sufficient to cover the Fund’s liabilities.
What happens next?
During 2022 we’ll carry out our full actuarial valuation, which we do every three years, to look at our funding picture in greater detail. We hope that this more comprehensive review will confirm, as indicated by our financial checks in 2020 and 2021, that we are well on track to meet our longer-term funding goal.
What about our investments?
We invest the Fund’s defined benefit assets on behalf of members. Here is how they did over three different time-periods to 30 September 2021.
| Total returns to 30 September 2021 | 1 year | 3 years, annualised | 5 years, annualised |
|---|---|---|---|
| These figures only show the return from invested assets. They exclude the effect of money paid out (e.g. pension payments) or money paid in (e.g. contributions from Barclays). | |||
| Total returns to 30 September 2021Total investment returns | 1 year2.0% | 3 years, annualised8.3% | 5 years, annualised5.8% |
| Total returns to 30 September 2021Liability returns | 1 year0.0% | 3 years, annualised5.4% | 5 years, annualised2.9% |
The ‘liability returns’ are the returns that UKRF assets need to achieve to maintain the funding position.
Read more about our investments.
We are working closely with Barclays
1. We have a plan (known as a Recovery Plan)
As shown in our 30 September 2019 valuation, Barclays has agreed to make payments to clear the Fund’s deficit by 2023.
2. We have back-up
Barclays makes contributions for active Afterwork members and continues to uphold its overall responsibility as the sponsor for the UKRF.
3. We have access to extra security (if needed)
If the UKRF is estimated to have a funding deficit again before September 2025, Barclays will provide a pool of assets as security, which we can use if any Recovery Plan payments are not made, or Barclays became insolvent.
And finally, by law we need to tell you:
- Barclays has not received any money back from the Fund since the 2020 Summary Funding Statement;
- The Fund has not received any directions from the Pensions Regulator to change contributions or benefits, nor has the Pensions Regulator made any modifications to the Fund; and
- If the UKRF were to discontinue or ‘wind up’, members’ benefits would need to be secured with an insurance company (instead of by the Fund). The cost of providing pensions in this way is much higher. At 30 September 2019, the value of the Fund’s assets was less than the estimated amount needed to secure all members’ accrued benefits. This deficit was £7.69 billion (compared to £18.75 billion in 2016), meaning there was an 82% funding level (compared to 65% in 2016). There is no intention to wind up the Fund.