Pensions - Articles - Pensions with end of March valuations need to review options


Aon has said that sponsors and trustees at around 15% of UK pension schemes have 31 March 2019 valuation dates and so need to discuss their options given the clash with the proposed date for the UK leaving the European Union.

 As much as 15% of UK schemes have a valuation date of 31 March 2019 – which is a Sunday this year. That means that their valuation will be driven by the market conditions at the close of markets on Friday, 29 March – and that could be an atypical day on the financial markets. If no action is taken now, then this potentially atypical point could lead to more difficult valuation negotiations.

 Lynda Whitney, partner at Aon, said: “There are plenty of levers that can be used within the legislative framework for valuations – but ultimately it’s a matter of sponsors and trustees having a grown-up conversation ahead of the end of March.

 “If markets do react significantly on 29 March it will inevitably be to the benefit of one side or the other – to the company sponsor or to the trustees. Therefore, both sides should hold an ‘in principle’ conversation as soon as possible, which will allow them to agree to use levers they may have ruled out in the past. They can for example, consider whether to have a one-off adjustment in the level of prudence, consider a one-off change in outperformance in the Recovery Plan period, or formally take into account post-valuation experience (although this has other consequences)."

 Lynda Whitney continued: “The aim here would be to avoid potential friction after 31 March – while nobody knows which side any market movements could favour.

 “We all hope that whatever might happen on 29 March will cause the minimum of disruption to both the economy and to pension schemes too, but it’s best for schemes to build in some tolerance ahead of the event if they have an imminent valuation date.”

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