The Global Risks Alliance (GRA)
A pension promise is a claim on money that must still be there decades from now, after markets, interest rates, life expectancy and the sponsoring employer have all moved. Resilience is the capacity of a scheme, and of the system around it, to keep that promise through those changes. This page sets out how funding and longevity exposures build, how they are measured in valuations and regulatory returns, and what the measures can and cannot tell the trustees, sponsors and regulators who act on them.
GRA · Established · service level R0
Pension scheme funding is the build-up of assets to meet promised benefits decades ahead, after markets, interest rates, life expectancy and the sponsoring employer have all moved. Resilience is the capacity of a scheme, and the system around it, to keep paying through those changes; funding levels differ by basis, from technical provisions to buyout.
How physical and transition risk could reach a loan book under different scenarios. Illustrative design values.
Funding and longevity exposures. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
A deficit is the difference between assets and the present value of promised benefits. When contributions fall short of new accrual and expected returns fall short of the discount rate, the gap widens each year and the recovery period lengthens.
Each small improvement in mortality lengthens every pension in payment. Improvements accumulate across cohorts and are uncertain in trend and level, so a scheme's own experience can diverge from national tables and from the assumption in its valuation.
As members retire, benefit outgo overtakes contributions and the scheme becomes a net seller of assets. A mature scheme has less time to recover from a loss and less room to take investment risk.
A deficit in a private scheme is a claim on the employer. Weakness in the sponsor often coincides with the market stress that widens the deficit, and where the sponsor fails, guarantee funds or members bear the remainder.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Buyout basis | The cost of insuring all a scheme's benefits with an insurer, usually the strictest funding measure. |
| Recovery plan | A schedule of contributions to remove a funding deficit over an agreed period. |
| Scheme maturity | The extent to which a scheme's members are retired, which narrows its options to recover from losses. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Funding ratio on the technical provisions basis | assets as percent of liabilities | at each actuarial valuation | Actuarial valuation reports and regulatory returns | REPORTED |
| Funding ratio on a buyout or solvency basis | assets as percent of liabilities | annual | Regulatory estimates from scheme returns | ESTIMATED |
| Cohort life expectancy at pension age | years | annual | National statistics and actuarial mortality tables | OFFICIAL |
| Long-term mortality improvement assumption | percent per year | at each valuation | Disclosed actuarial assumptions | DECLARED |
| Net cash flow ratio | benefits less contributions as percent of assets | annual | Fund financial statements | REPORTED |
| Recovery plan length | years | at each valuation | Recovery plans filed with the regulator | DECLARED |
| Sponsor covenant grade | ordinal grade on the regulator's or adviser's scale | at each valuation | Covenant assessments | ESTIMATED |
| Old-age dependency ratio | persons of pension age per person of working age | annual | National statistics and population projections | OFFICIAL |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| OECD Global Pension Statistics | Assets, contributions, benefits and investment of funded pension arrangements by country | Free reuse, attribution |
| OECD Pensions at a Glance | Comparative pension system design, coverage and demographic context | Free reuse, attribution |
| EIOPA occupational pensions statistics | Balance sheets, technical provisions and membership of IORPs in the European Economic Area | Free reuse, attribution |
| The Pensions Regulator scheme funding analysis and annual funding statement | Valuation results, recovery plans and funding expectations for UK defined benefit schemes | Open Government Licence |
| Pension Protection Fund Purple Book | Funding, investment and risk profile of schemes eligible for the UK guarantee fund | Free to read, PPF terms |
| PBGC Pension Insurance Data Tables | Funding, claims and premium data for insured US defined benefit plans | Public domain |
| Human Mortality Database | Detailed national mortality and population series for life expectancy and improvement analysis | Creative Commons attribution |
| Public Plans Data (Center for Retirement Research at Boston College) | Funding, assumptions and contributions of US state and local pension plans | Free to use, attribution |
Institutional Funds Nexus prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Trustees and pension boards | What contributions and recovery plan to agree, and how much investment risk the scheme can carry | Funding on several bases, longevity sensitivity, covenant evidence and stressed outcomes |
| Sponsoring employers | Whether to fund deficits faster, hedge risks or transfer liabilities to an insurer | Funding trajectories under scenarios; the cost and residual risk of each route |
| Pension regulators | Whether valuations, recovery plans and investment strategies meet the funding code | Comparable funding and assumption data across schemes; scheme maturity and covenant |
| Pension guarantee funds | How to set risk-based levies and reserve for claims | Funding on the guarantee basis, sponsor insolvency risk and concentration of claims |
| Legislatures and pension ministries | How to set retirement ages, indexation rules and guarantee coverage | Demographic projections, system-level funding and the distribution of risk |
Resilience questions ask who bears which risk, and whether they can.
In defined benefit schemes, the sponsor promises benefits and absorbs shortfalls. Funding depends on contributions, investment returns and the discount rate used to value liabilities; lower rates or longer lives increase liabilities. In defined contribution schemes, members bear the risks directly, and outcomes depend on contributions, costs, returns and the timing of retirement.
Longevity is a slow but powerful driver. Improvements in life expectancy are a social good but raise the cost of lifetime income, and their pace is uncertain. Population ageing changes the ratio of contributors to beneficiaries in pay-as-you-go systems and affects the economy that funded schemes invest in.
| Method or data | What it shows | Limits |
|---|---|---|
| Actuarial valuation | The value of liabilities under stated assumptions | Results depend heavily on discount rate and mortality assumptions |
| Mortality and longevity models | Projected life expectancy and its uncertainty | Future improvements are uncertain; pandemics disrupt trends |
| Asset-liability stress tests | Funding under adverse scenarios | Scenarios are chosen, not predicted |
| Adequacy modelling for defined contribution | Likely retirement outcomes | Sensitive to behaviour and contribution assumptions |
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.