The Nationwide Pension Fund is a Defined Benefit Scheme.

This means the fund is one single pot for all members.

The pot grows as contributions for members and the Society are added, along with returns on the Fund’s investments.

Money is then withdrawn from the pot to pay benefits to members as they become due.

The Trustee must make sure the pot will be big enough both now and in the future to pay these benefits to its members.

To do this the Trustee undertakes regular assessments of the Fund’s financial health.

This happens every three years.

You may have seen documents from the Trustee in the past that refers to this process as the actuarial valuation

The outcome of this financial health check will show if the Fund has too much money, too little money, or just enough.

The aim is to be somewhere in the middle.

If the Fund has too little money this is referred to as a deficit.

In the event of a deficit, the Trustee will then work with the Society to agree a plan for getting back on track.

This plan may include the Society paying extra contributions.

This is often the first consideration, which usually results in the Society agreeing to pay additional lump sums into the Fund.

Fund investments could be changed with a view to generating additional returns.

As with any investments the value of these could go up but could also go down.

We must remember that the benefits due to members won't all need to be paid today.

Some may not be payable for decades to come.

Therefore when there is a deficit the Trustee has time to address this.

Of course the actuarial valuation is a check on the Fund’s financial health, at a specific date, and the actual funding level can and will change on a daily basis.

Therefore in the periods between the actuarial valuations the trustee performs mini health checks, to make sure everything is going to plan.

You’ll have seen the results of these checks in the funding update which forms part of the Annual Review.

If things are not going as expected, the Trustee can undertake an actuarial valuation early and then agree a new plan with the Society

There’s much more information available on the Fund website. Including a number of formal documents relating to funding.

Just go to nationwidepensionfund.co.uk and hit the document library button.