On the go: Scottish broadcaster STV has agreed to pay off its £127m defined benefit pension deficit over 12 years, including additional contributions if its cash flow improves, after completing triennial valuations of its schemes.
STV sponsors both the Scottish and Grampian Television Retirement Benefit Scheme and the Caledonian Publishing Pension Scheme, which at the end of 2018 had combined assets of £343.4m. Both schemes are closed to future accrual.
The schemes are underfunded by £127m as at February 28 this year, down marginally from a £130m funding gap at the previous settlement date of November 30 2016.
Despite minimal progress being made on the schemes’ funding, sponsor STV has agreed to leave its monthly contributions virtually unchanged compared with the terms of the previous valuation agreement.
Payments into the scheme over 2019 will be £9m, compared with £8.8m in 2018. Deficit repair contributions are scheduled to rise by 2 per cent each year, and if the schemes’ position does not worsen the gap will be filled by 2031.
By that time, the company and trustee envisage that the schemes will be self-sufficient, running a derisked investment strategy targeting 0.5 per cent over the return on gilts.
At 12 years, STV’s recovery plan is at the long end of what the Pensions Regulator currently deems acceptable. In its March annual DB funding statement, the watchdog indicated the median recovery plan length is now seven years, and that strong sponsors should have plans that are “significantly shorter” than this.
However, STV has also put in place contingent measures to ensure its schemes are better funded if their employer covenant improves.
“In the event of outperformance against the company’s sensitised forecast net cash flow, contingent funding payments equivalent to 20 per cent of any outperformance above a benchmark of available cash will be paid to the schemes,” the company announced to investors last week.
The same mechanism was used at the schemes’ last valuation, resulting in an additional £1.4m windfall for the trustees in 2018, which will be paid this month.
Simon Pitts, STV’s chief executive officer, said: “This pension scheme valuation agreement provides certainty to both STV and the schemes’ trustees by putting the schemes on a clear path to self-sufficiency while demonstrating STV’s continued commitment and support.”
