Contents

Summary Funding Statement 2019

Hewlett-Packard Limited Retirement Benefits Plan
DIGITAL SECTION

Introduction

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. The results of the assessment cover the period to 31 October 2019.

At 31 October 2019 the Plan assets had increased in value to £1,999.2m. The funding target had also increased to £1,970.8m. The resulting funding level is 101.4%, an improvement of 2.5% compared to the 2018 figure.

At 31 October 2018 the Plan assets were valued at £1,790.4m. The funding target was £1,810.7m resulting in a funding level of 98.9%.

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%.

Chairman's welcome

Dear Member

Summary Funding Statement for the Digital Section of the Hewlett Packard Limited Retirement Benefits Plan (the Plan)

Welcome to the latest update on the funding of the Plan. In April 2018 we sent you a funding statement which set out the results of the annual review as at 31 October 2017. In January 2020, the actuarial valuation as at 31 October 2018 was completed and the results of this actuarial valuation are set out in this update. Since completion of the actuarial valuation the Scheme Actuary has carried out a further funding assessment of the Plan as at 31 October 2019 and the results of this assessment are also 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 on our website at hprbp.com. If you would like to contact the Trustee, please write to us using the address at the top of the page or e-mail us at hpplantrustees@insidepensions.com.

Finally, please make sure that you keep your personal information up to date with the Plan administrators Equiniti Paymaster. This includes your postal address, your email address and your Nomination of Beneficiary form. Equiniti Paymaster can be contacted on 01293 604844 or by e-mailing digital@equiniti.com. Nomination of Beneficiary forms can also be downloaded from our website.

Yours faithfully

Paul Early signature

Paul Early
Chairman of the Trustee
Hewlett-Packard Limited Retirement Benefits Plan

Summary Funding Statement

Funding the Plan

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.

How the Plan operates

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.

The results of the funding assessment as at 31 October 2019

The Scheme Actuary carried out an updated funding assessment at 31 October 2019. This showed that the Plan’s funding target was £1,970.8 million, whilst the value of the assets was £1,999.2 million, giving the Plan a surplus of £28.4 million and a funding level of 101.4%.

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

The surplus in the funding

£1,970.8 million

£1,999.2 million

£28.4 million

Changes in the funding level since the actuarial valuation

The funding level increased over the year, with the shortfall in the funding changing to a surplus of £28.4 million. The main reason for this was that the value of the Plan's assets increased, due to higher than expected investment returns and the Company's contribution of £3.8 million paid in April 2019. 

The increase in the assets was partially offset by an increase in the funding target over the period as a result from a fall in the expected return on bonds. This meant that more money was needed to be set aside in order to pay benefits in the future.

The results of the actuarial valuation as at 31 October 2018

The Scheme Actuary has certified the results of the actuarial valuation as at 31 October 2018. The Plan’s funding target was £1,810.7 million. The value of the assets at the same date was £1,790.4 million, giving the Plan a shortfall of £20.3 million and a funding level of 98.9%.

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

The shortfall in the funding

£1,810.7 million

£1,790.4 million

£20.3 million

Changes in the funding level since your last Summary Funding Statement 

The funding assessment as at 31 October 2017 showed that the funding level was 99%, resulting in a shortfall of £12.9 million. The funding level has therefore slightly decreased over the year and the shortfall in the funding has increased by £7.4 million.

The main reason for the increase in the funding shortfall is that the value of the Plan's assets decreased from £1,836.7 million to £1,790.4 million over the year. This was largely as a result of lower than expected asset returns.

This was partially offset by a decrease in the funding target over the period as a result of updates to the actuarial assumptions agreed as part of the actuarial valuation.

Recovery Plan

During the actuarial valuation process, the Company paid £3.8 million in April 2019. It was anticipated that this contribution together with investment returns would be sufficient to eliminate the funding shortfall by 31 October 2020, based on the position as at 31 October 2018.

The security of your benefits

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
  • 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.

The Pension Protection Fund

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.ppf.co.uk.

Or you can write to the Pension Protection Fund at
Renaissance
12 Dingwall Road
Croydon
Surrey
CR0 2NA

What is the Plan invested in?

The Trustee regularly review the Plan's investments and the investment strategy. The current investment strategy is to invest 10% in growth type assets (such as company shares) and 90% 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.

Additional documents available on request

You are entitled to request a number of Plan documents 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 2018
  • The Scheme Actuary's report assessing the funding level as at 31 October 2019
  • The Statement of Funding Principles
  • The Statement of Investment Principles
  • The Schedule of Contributions
  • The Recovery Plan
  • The Member’s booklet  (which you should have received when you joined the Plan)

If you would like a copy of any of the above please contact the Trustee by writing to the address on the front page or by emailing hpplantrustees@insidepensions.com.

Key Terms

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:

Statutory funding objective

The statutory funding objective is that any plan should hold assets whose value is no less than its ‘technical provisions’.

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.

Funding level

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.

Statement of Funding Principles

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

  • How quickly the Trustee and the Company aim to make up any shortfall

Recovery Plan

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.

What is an Actuarial Valuation?

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.