Scheme funding
At least every three years the Trustee formally reviews the Scheme’s funding. This review is known as a Triennial Actuarial Valuation. It measures the Scheme’s assets (money held) and liabilities (money to be paid) and shows whether the Scheme has a shortfall (less than required) or is in surplus (more than required).
Each year the Trustee is required to provide you with an annual update on the funding position of the Scheme. The funding position is measured in two ways:
Ongoing basis – assumes that the Scheme will carry on as normal.
Solvency basis – assumes the Scheme will 'wind up' and all assets are used to purchase individual member annuities from an insurance company.
Actuarial valuation as at 30 September 2019
The formal actuarial valuation of the Scheme revealed the following:
| Technical Provisions Basis | Solvency Basis | |
|---|---|---|
| £million | £million | |
| Assets (money held) | 1,260.9 | 1,260.9 |
| Liabilities (money to be paid) | 1,119.0 | 1,229.4 |
| Shortfall/Surplus | 141.9 | 31.5 |
| Funding level | 113% | 103% |
The actuarial valuation is based on a set of economic and demographic assumptions set by the Trustee Board. It uses the technical provisions to determine whether Maersk (the Company) needs to pay any additional contributions to cover a shortfall. Technical provisions measure the extent of the liabilities needed to pay member pensions and are measured on a cautious basis.
Funding position on an ongoing basis
The Trustee is required to carry out an annual interim review of the Scheme’s funding position. The latest formal actuarial valuation of the Scheme was as at 30 September 2019 and an update undertaken as at 30 September 2021, details of which are shown in the table below. The figures shown are on a technical provisions basis:
| 30 September 2021 | 30 September 2020 | 30 September 2019 | |
|---|---|---|---|
| £million | £million | £million | |
| Assets (money held) | 1,137.6 | 1,261.9 | 1,260.9 |
| Liabilities (money to be paid) | 1,041.9 | 1,111.1 | 1,119.0 |
| Shortfall/Surplus | 95.7 | 150.8 | 141.9 |
| Funding level | 109% | 114% | 113% |
On 20 November 2020, as part of the Trustee’s and Company’s continued strategy to significantly reduce the risk in the Scheme, the Trustee purchased a bulk annuity policy from Legal & General covering the Scheme’s defined benefit liabilities built up to 30 September 2019. The cost of the policy exceeded the corresponding technical provisions, reducing the surplus in the Scheme to approximately £95 million at the point of purchase, and reducing the funding level from 114% to 109%.
Funding position on a solvency basis
The Trustee is required to estimate the amount of money it would need to buy annuities (pension payments) from an insurer to cover members’ pensions if the Scheme were to 'wind up' and cease to exist.
Providing these details to members is required under legislation and does not mean that the Company is thinking of winding up the Scheme.
If the Scheme had wound up as at 30 September 2021, the assets held by the scheme would have been sufficient to meet the Scheme’s liabilities in full.
Additional contributions to the Scheme
Given the Scheme’s strong funding position, confirmed by the formal actuarial valuation as at 30 September 2019, the Trustee and Company agreed that from 31 May 2021, when the Company closed the Scheme to the build up of future pension benefits, no further contributions would be paid.
The Pensions Regulator’s role
In certain circumstances, The Pensions Regulator has powers to intervene in a pension scheme’s funding plan and amend a pension scheme’s rules. The Pensions Regulator has not used any of these powers in relation to the Scheme.
Has the Company taken any money out of the Scheme?
Regulations require us to confirm that the Company has not taken any money out of the Scheme since we last sent you a valuation update. We are happy to confirm this.
The future of the Scheme
The Trustee had set a funding target for the Scheme to ensure that it had sufficient funds to meet the technical provisions and pay member’s pension benefits as they become due without relying on ongoing support from the Company. BlackRock Investment Management was tasked by the Trustee to manage the Scheme’s assets and to reach the funding target required.
The September 2019 actuarial valuation confirmed that the Scheme had met its funding target. Consequently, the Trustee with the full support of Maersk, further reduced the investment risk in the Scheme by entering into an insurance contract with L&G. This insurance contract provides further security for all future benefit payments and annual pension increases to which members are entitled under the Rules of the Scheme. The contract is in the form of a buy-in and means that the policy is held as an investment of the Scheme. The Trustee continues to run the Scheme with Mercer continuing to carry out the day-to-day administration. L&G is responsible for providing the funds required to meet benefit payments.
Separately, in March 2021, the Company undertook to close the scheme to future accrual for the 31 remaining active members. The Scheme closed to future pension accrual on 31 May 2021.
For more financial information, go to Financial summary and Investment strategy. You can also read the full Annual Report and Accounts.