Summary Funding Statement

You are entitled to certain information about the funding of the Plan as you hold benefits within it. The Pensions Act 2004 also requires that the Trustee provides information to members each year about the financial position of the Plan.

As you may know, the Plan is administered by a Trustee group, independent of Emerson, whose role is to ensure that the Plan maintains adequate funding to meet its benefit obligations to its members.

How your benefits are secured

Security of your benefits is provided principally by the assets held by the Plan, Emerson’s continuing support and future contributions. Contributions are paid into the Plan by Emerson, so that it can pay benefits to members when they retire. These contributions are generally held in a common fund, rather than a fund for each individual member. This common fund is invested in line with the decisions taken by the Trustee, in conjunction with its professional advisers. All stocks and bonds are lodged with Northern Trust bank, the appointed official custodian for the Plan who will only deal with properly authorised instructions. However, separate funds are held for each individual in the Plan for:

• the assets of the defined contribution (DC) sections of the Plan (in the DC Segregated Section);
• the assets of the Fisher Controls Personal Retirement Accounts (in the DB Segregated Section); and
• any additional voluntary contributions (AVCs) paid by members or other DC investments (in the DB Segregated Section, the EBCO Segregated Section and the DC Segregated Section, as appropriate).

How the funding level is calculated

When looking at the funding level for the Plan, the cost of providing the benefits promised is compared to the value of the investments held in the Plan.

The Trustee commissions a Plan actuary to perform an in-depth analysis of the Plan’s finances, called an actuarial valuation. The latest actuarial valuation of the Plan was carried out as at 31 March 2017. Actuarial valuations must be undertaken every three years to provide a report on the status of the Plan. This means that the next valuation of the Plan is expected to be carried out as at 31 March 2020.

Valuations show the status of the Plan’s funding at that date. Valuations are important to the Plan as they allow the Trustee to develop a new Schedule of Contributions which details the amounts Emerson must contribute to ensure that the Plan maintains a satisfactory funding level. In addition to the triennial valuation, the actuary also produces a yearly report.

When the Plan actuary calculates the cost of providing the Plan benefits, a number of assumptions are made about what the actuary and the Trustee think will happen in the future with, for example, investment returns, price inflation and life expectancy.

Actuarial valuation of the Plan

An actuarial valuation as at 31 March 2017 was completed and approved by the Trustee at a meeting in December 2017. A new Schedule of Contributions was also approved. The Plan’s Technical Provisions at 31 March 2017 totalled £562.3 million, where Technical Provisions is a measure which reflects the amount that may be needed to pay members’ pensions as they fall due. The Plan’s assets totalled £573.8 million which resulted in the Plan having a surplus of £11.5 million and a funding level of 102.0%.

Following the valuation, on 8 January 2018 the main section of the Emerson Valves & Controls UK defined benefit pension scheme (V&C Scheme) was merged into the Plan. Additionally, as part of the merger, the EBCO Segregated Section of the Plan was formed which contains all of the assets and liabilities formerly of the EBCO Section of the V&C Scheme. The funding position shown above, at 31 March 2017, relates to the Plan at that date, which was before this merger, and so excludes all assets and liabilities of the V&C Scheme.

The estimated funding positions of the Plan at 31 March 2018 and 31 March 2019 include allowance for the assets and liabilities of the Main Section of the V&C Scheme following the merger.

The estimated Technical Provisions of the Plan at 31 March 2018 totalled £753.6 million, with the assets totalling £769.4 million. This means that the Plan had an estimated surplus of £15.8 million and an estimated funding level of 102.1%.

The estimated Technical Provisions of the Plan at 31 March 2019 totalled £746.8 million, with the assets totalling £789.4 million. This means that the Plan had an estimated surplus of £42.6 million and an estimated funding level of 105.7%.

The funding level as at 31 March 2019 is estimated to have increased from the 31 March 2018 funding level. The main factors contributing to this were a greater than expected return on the Plan assets over the period and a Company contribution paid to the Plan in March 2019. These more than offset the effects of a slight decrease in corporate bond yields, and a slight increase in expected price inflation.

The above asset and liability figures exclude all benefits provided in respect of the DC Segregated Section and the EBCO Segregated Section and also exclude any AVCs and other DC benefits within the Plan.

The Plan’s estimated financial position at:

Please note that the funding level at 31 March 2017 and dates prior to that relate to the Plan before the merger of the Main Section of the V&C Scheme into the Plan on 8 January 2018.

What would happen if the Plan were wound-up?

The estimated additional amount needed to ensure that all members’ benefits could be paid in full if the Plan started winding-up (full solvency) was £135.9 million as at 31 March 2017. This cost arises because the benefits would have to be secured with an insurance company if the Plan were to wind-up. By winding-up we mean Emerson being unwilling (or unable) to continue to run the Plan and contribute to it on an ongoing basis. Emerson has a legal obligation to fund the shortfall if this were to happen.

The Trustee has a statutory obligation to give you this information. It does not imply that Emerson is considering winding-up the Plan. Emerson has demonstrated its willingness to support the Plan by making contributions to the Plan that are significantly larger than it was required to make. Since 2005, Emerson has paid in contributions totalling £188.5 million in relation to the DB Sections of the Plan compared with a contribution requirement of £122.5 million over the same period.

If Emerson became insolvent, The Pension Protection Fund (PPF) might be able to take over the Plan and pay compensation to members, should there be a shortfall between the Plan’s assets and the PPF’s measure of Plan liabilities. Further details on the operation of the PPF are available on the PPF’s website at www.ppf.org.uk. Or you can write to them at the following address: The Pension Protection Fund, Renaissance, 12 Dingwall Road, Croydon, Surrey, CR0 2NA.

Other matters

We are obliged to inform you if any payment has been made from the Plan to Emerson since the previous statement. The Trustee can confirm that no such payment has been made. Similarly, we are obliged to inform you if the Pensions Regulator has made modifications to the Plan or given specific directions on the funding of the Plan. Again, the Trustee can confirm that no such modifications or directions have been made.

Looking after your data

Some personal data for Plan members (such as date of birth and salary) is required for the running of the Plan, including paying out the right benefits. The General Data Protection Regulation (GDPR) came into effect from 25 May 2018 and the use of this personal data is regulated under the GDPR, which places certain obligations on those who exercise control over the data (known as ‘controllers’ under the GDPR). Controllers would include the Trustee of the Plan, and, in certain circumstances, professional advisers to the Plan. These may include the Plan actuary and Willis Towers Watson who have provided further details at www.willistowerswatson.com/personal-data

Where can I get more information?

If you have any questions, or would like any more information, please contact Buck, the Plan administrator, by using the details at www.oneemerson.co.uk/contact-us. A list of more detailed documents which provide further information is shown below. If you would like us to send you any of these documents, please let Buck know.

Additional documents available on request

• Statement of Investment Principles - this explains how the Trustee invests the money paid into the Plan.
• Statement of Funding Principles - this explains how the cost of providing benefits is calculated and the Trustee’s policy for ensuring that the cost is adequately met.
• The full report on the Actuarial Valuation following the actuary’s check of the financial situation of the Plan as at 31 March 2017. This report gives detailed information on the Plan’s funding position and on the many factors that will influence the development of the Plan in the future.
• Actuarial Report as at 31 March 2019 - this provides updates on the Plan’s funding position.
• Schedule of Contributions - this shows the level of contributions that are being paid into the Plan.
• Annual Report and Accounts - these show the Plan’s income and expenditure in the year up to 31 March 2019, as well as details of the Plan’s investments as at 31 March 2019.