This statement explains the funding that supports your benefits in the Digital Section of the Hewlett-Packard Limited Retirement Benefits Plan (the Plan). It tells you about the longer-term outlook for the Plan and the substantial financial support Hewlett-Packard Limited (the Company) provides.
As at 31 October 2017 the Plan assets had increased in value to £1,836.7m. The funding target had reduced to £1,849.6m. The resulting funding level is 99%, an improvement of 4% compared to the 2016 figure.
As at 31 October 2016 the Plan assets had increased in value to £1,793.4m. The funding target had also increased to £1,885.7m resulting funding level of 93%.
As at 31 October 2015 the Plan assets were valued at £1,487.9m. The funding target was £1,662.7m resulting in a funding level of 89%.
Welcome to the latest update on the funding of the Plan. Last August we sent you a funding statement which set out the results of the actuarial valuation as at 31 October 2015 and the results of the annual funding assessment as at 31 October 2016. The Scheme Actuary has carried out a further funding assessment as at 31 October 2017 and the results of that assessment are set out in this update.
This statement includes background information to help you understand the Plan’s funding, but you can also find more information about the Plan throughout this website. If you would like to contact the Trustee, you can find all the details on the contact page.
The next Summary Funding Statement will not be produced until after the completion of the actuarial valuation as at 31 October 2018. The statutory deadline for completion is 31 January 2020, and so you may only receive the next Summary Funding Statement in spring 2020.
Finally, please make sure that you keep your personal information up to date with the Plan administrators, Equiniti. This includes your postal address, your email address and your Nomination of Beneficiary form. Contact details for Equiniti can be found on the contact page under 'The Administration Team'. Nomination of Beneficiary forms can also be downloaded from the Document library.
Chairman of the Trustee
Hewlett-Packard Limited Retirement Benefits Plan
The Company pays contributions to the Plan so that the Plan can pay benefits to Plan members. Contributions are also paid by or on behalf of active members.
The money to pay for members’ pensions is held in a common fund. It is not held in separate funds for each individual.
Under the Pensions Act 2004 we are responsible for setting a funding target for the Plan and agreeing it with the Company. The Plan’s funding is the money it has to support the benefits. The Scheme Actuary helps us to consider our funding target in detail, check the Plan’s progress against it and take action to deal with any shortfall or surplus. Long-term, the aim of the requirements is to make sure that plans like ours are building up enough money to pay for the benefits due to members.
The Scheme Actuary carried out an updated funding assessment as at 31 October 2017. This showed that
the Plan’s funding target was £1,849.6 million, whilst the value of the assets was £1,836.7 million, giving the Plan a shortfall of £12.9 million and a funding level of 99%.
If the Plan is 100% funded it has the full amount it needs to provide benefits under its technical provisions, which is
The value of the Plan’s assets is
The shortfall in the funding is
Changes in the funding level since the previous update
The funding assessment as at 31 October 2016 showed that the funding level was 95%, resulting in a shortfall of £92.3 million. The funding level has therefore increased over the year and the shortfall in the funding has decreased by £79.4 million.
The main reason for the decrease in the funding shortfall is that the value of the Plan’s assets increased from £1,793.4 million to £1,836.7 million. This was largely as a result of the Company’s contribution of £43.9 million paid in March 2017.
The increased funding level was also a result of a decrease in the funding target over the period as a result from a rise in the expected return on bonds and a decrease in expectations for future inflation. This meant that less money was needed to be set aside in order to pay benefits in the future.
Because there was a shortfall in the funding of the Plan as at the formal valuation, the Trustee agreed a plan with the Company to get the funding back up to 100% by 31 October 2021. As part of this plan it was agreed that additional contributions should be paid to the Plan with the aim of removing the shortfall by 31 October 2021. In practice, contributions payable by the Company are recalculated each year, and also cover the cost of future accrual and expenses incurred in running the Plan.
Between the date of the formal valuation and 31 October 2017, the Company paid additional contributions totalling £78.4 million into the Plan. Based on the position as at 31 October 2017, it was expected that the Plan would be fully funded by 31 October 2021 without the need of any further contributions. It was therefore agreed that the Company would not be required to pay additional contributions into the Plan in 2018. Company contributions will next be recalculated based on the position as at 31 October 2018.
We check the money available to support the Plan regularly but the Plan relies on the Company and its financial support to:
Make contributions to fund the cost of the benefits building up, over and above the amount members contribute;
Make extra contributions when there is a shortfall; and
Pay the future expenses of running the Plan each year (including payments to the Pension Protection Fund).
There have not been any payments to the Company from the assets of the Plan since the date of the last Statement.
The Pensions Regulator can change the Plan, give directions about working out its technical provisions or impose a Schedule of Contributions. The Regulator has not needed to use any of these powers for the Plan.
If the Plan starts to wind up before you retire, the Company has to pay whatever the Plan needs to buy the insurance policies for members. If the Company becomes insolvent, the Pension Protection Fund (the PPF) may step in and pay some compensation to members.
There are more details on the PPF’s website at www.pensionprotectionfund.org.uk.
Or you can write to the Pension Protection Fund at:
12 Dingwall Road
The Trustee regularly review the Plan's investments and the investment strategy. The current investment strategy is to invest 17% in growth type assets (such as company shares) and 83% in protection type assets (bonds and other assets that closely match the liabilities of the Plan). Interest-rate and inflation hedges are also used to reduce the sensitivity of the funding level to changes in these. The Trustee has agreed that as the funding level improves, the investment strategy will be de-risked. The de-risking strategy has been set such that 12% will be invested in growth type assets and 88% in protection type assets by the time the Plan is fully funded on the technical provisions measure.
You are able to view a number of Plan documents in the Document library section of this website including the following:
The latest Trustee’s Report and Financial Statements;
The full report by the Scheme Actuary on the actuarial valuation as at 31 October 2015;
The Scheme Actuary's report assessing the funding level as at 31 October 2017;
The Statement of Funding Principles;
The Statement of Investment Principles;
The Schedule of Contributions; and
The Recovery Plan.
The Plan website includes information on how your benefits are calculated.
This Statement is based on the scheme-specific funding requirements set out in the Pensions Act 2004. Here are some key terms and what they mean:
The Scheme Actuary compares the technical provisions with the market value of the assets to derive the funding level which is expressed as a percentage. A funding level of 100% means that the value of assets exactly equals the technical provisions.
If the value of assets is less than the technical provisions (i.e. there is a funding shortfall), the Trustee and Company must agree steps to be taken – usually involving additional company contributions - to eliminate the shortfall. These steps are recorded in a document known as a recovery plan.
This is a document that sets out the Trustee’s policy for meeting the statutory funding objective. It covers:
The method and assumptions to use;
How the Scheme Actuary works out Company contributions; and
How quickly the Trustee and the Company aim to make up any shortfall.
The statutory funding objective is that any plan should hold assets whose value is no less than its ‘technical provisions’.
This is the amount that the Trustee determines the Plan will need to pay members’ benefits for service up to the valuation date.
The aim of an actuarial valuation is to suggest:
How much money the Plan needs to cover the benefits members have already earned; and
What contributions the Plan needs for benefits building up in future.
No-one can predict what will happen in future with certainty, but by choosing sensible assumptions, it is possible to estimate how much money is needed now to provide benefits in future. As the Trustee, we then use our judgement to decide on an appropriate funding plan. It is a legal requirement that we discuss and agree with the Company the assumptions to be used and the funding plan to be adopted. The Trustee also seeks the advice of the Scheme Actuary, one of our professional advisers, before making any decisions.
In the actuarial valuation, the Scheme Actuary compares:
The assets the Plan is building up through its investments, in its bank balances and any money owed to the Plan; with
The liabilities the Plan has to pay, including administrative expenses and benefits for members and their families, based on the assumptions chosen.