Defined Benefit pension schemes have to be governed by trustees. These trustees are appointed to act in the interests of all of the beneficiaries of the trust.
Defined benefit schemes must keep track of their funding position. This includes getting a full valuation every three years.
The funding position of a defined benefit scheme is measured by comparing the scheme's assets with its liabilities.
Liabilities are a collection of ‘promises’ to pay an income to each member of the scheme.
The funding position provides information on the scheme’s ability to cover its liabilities using the scheme’s funds and assets held. Think of it as pension schemes having to check how much money they have available and compare that to how much money they need to pay to members that have already retired.
Although schemes only have to do a valuation every three years, the trustees will check the scheme’s financial state of health much more often. Especially during market turbulence and uncertainty.