TPR publishes Annual Funding Statement 2026

Introduction

On 6 May 2026, the Pensions Regulator (TPR) published its Annual Funding Statement for 2026. The statement confirms a structural shift in defined benefit (DB) funding, with the focus for most schemes moving away from deficit repair towards endgame strategy and the management of risk under the new DB funding regime. The full statement is available at: https://www.thepensionsregulator.gov.uk/document-library/statements/annual-funding-statement-2026.

TPR’s analysis indicates that, as at 31 December 2025, the aggregate funding level across DB schemes was 124% on a technical provisions basis, with around 60% of schemes in surplus on a buyout basis. Against this backdrop, TPR notes that the role of actuarial valuations is evolving. It emphasises that the Statement of Strategy document should drive the valuation process, rather than being treated as a post-valuation output.

Experience to date suggests that around 80% of schemes are able to meet Fast Track requirements with little or no cost to the employer. TPR has confirmed that it is not making any changes to the Fast Track parameters published in November 2024. However, it has acknowledged that market conditions are notably different from those prevailing as at 31 March 2023, which was the economic reference date used to derive those parameters. TPR will continue to monitor volatility in global markets and has indicated that it may consider updating the parameters for Tranche 26/27 valuations if current conditions persist.

Other conditions required to meet Fast Track will also remain under review, and amendments may be implemented in future. TPR recognises that material changes to Fast Track tests and conditions can have a significant impact on a scheme’s valuation approach and has confirmed that it will be mindful of this when considering any updates.

Funding strategies

As part of its annual analysis, TPR groups schemes into different funding categories and outlines its expectations based on funding level and maturity.

Schemes funded well above low dependency, defined as being funded at 110% or more on a low dependency basis, are expected to focus on finalising and implementing their chosen endgame strategy. Depending on their time horizon to buyout, schemes should pay close attention to the suitability of their investment approach. Those closer to buyout are expected to prioritise minimising volatility in their funding position, while schemes with a longer time horizon may consider an investment strategy carrying a higher level of risk. Where schemes expect to run on, trustees are encouraged to review and clarify their policies on the potential use or release of surplus.

Schemes funded at or just above low dependency, typically between around 100% and 110% on that basis, are encouraged to begin endgame planning. Trustees should determine the extent to which the scheme will rely on employer covenant support to underpin any remaining funding or investment risk and ensure that covenant monitoring is proportionate to that reliance.

Schemes with funding above technical provisions but below the low dependency target are expected to maintain steady progress towards low dependency through ongoing monitoring and management of downside risks. Schemes funded below technical provisions should continue to focus on addressing deficits, with recovery plans aligned to covenant strength and scheme maturity.

General considerations

TPR concludes its statement with a number of wider observations relevant across the DB landscape. It highlights the growing importance of cyber risk, noting that cyber incidents can materially affect employers and, in turn, the strength of the employer covenant. Trustees are expected to monitor such risks, with the depth and frequency of monitoring proportionate to the circumstances of both the scheme and the employer.

Climate change and wider sustainability considerations are also emphasised, alongside the continuing impact of macroeconomic uncertainty. Trustees are encouraged to consider how these factors may affect both investment outcomes and employer covenant strength and to ensure that effective operational and investment governance processes are in place to enhance resilience to market shocks.

Finally, TPR notes that it is reviewing the data requirements for DB and hybrid scheme returns, with changes scheduled to be introduced from the 2027 scheme return onwards. This review is intended to ensure greater alignment with the new DB funding code and Statement of Strategy framework.