Pennon DB schemes swing into surplus following additional contributions

Pennon’s defined benefit (DB) pension schemes swung from a deficit of £8.5m in March 2020 to an £8.8m surplus in March 2021, the water supplier’s full-year results report has revealed.

During the year, Pennon contributed an additional £36m to its principal pension scheme, the Pennon Group Pension Scheme (PGPS), following its sale of Viridor.

A further £17m will be contributed upon payment of the proposed return of capital to shareholders.

Liabilities increased by approximately £72m in 2020/21, which Pennon attributed to adverse movements in financial and other actuarial assumptions, particularly corporate bond yields.

However, this was partially offset by asset values increasing by around £60m.

Around £22m of the increased pension liabilities related to the transfer and settlement of certain pension obligations related to Viridor, and the impact of closing the principal DB scheme to future accrual.

The decision to close the PGPS to future accrual from 1 July 2021 was made following an employee consultation on plans to “modernise” the firm’s pension arrangements.

All active members of the PGPS will move to a new defined contribution (DC) master trust, resulting in a non-underlying curtailment charge of £4.4m.

Pennon added that is is continuing to simplify its DB arrangements, with the residual assets and liabilities from sections of the Citrus pension schemes being transferred to the PGPS in March 2021.

As at 31 March 2021, the PGPS was approximately 103 per cent funded under the agreed technical provisions in the 2019 valuation.

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