DB trustees will have to submit an annual ‘statement of strategy’ alongside actuarial valuations under new proposals announced by The Pensions Regulator.
This should set out long-term funding and investment strategy for the scheme and approach to managing associated risks.
TPR is proposing that these new requirements come into force from 22 September this year.
In order to help schemes manage these changes, and reduce administration for trustees, the regulator has released a set of templates for these strategies, and is inviting feedback on these templates and its proposals, as part of a wider consultation process.
The consultation builds on TPR’s previous DB funding code consultations and runs for six weeks closing on Tuesday, 16 April
TPR says that these new templates should be a useful tool to support trustees in their long-term planning and risk management, and facilitate engagement between trustees, employers and the regulator.
TPR’s interim director of regulatory policy, analysis and advice, Lou Davey says: “Receiving statements of strategy will give us additional data to better understand journeys that schemes are on as they mature, improving our regulatory oversight.
“Our proposals are designed to make it as easy as possible for trustees to comply with new legislation, and ultimately to show how they are acting in the best interest of savers.
“We want a broad range of views to ensure our proposals are understood and accepted by trustees and advisers.
“In particular we want to know if people think we are being clear on what data we’re asking trustees to provide, whether this data is readily available, or what challenges there could be in sourcing it.”
The consultation has been welcomed by many in the industry. The Society of Pension Professional president Steve Hitchiner says: “We are particularly pleased that TPR has acknowledged the need to deliver the benefits of the statement of strategy without unnecessarily increasing trustee burden and cost for schemes, which are key concerns for many SPP members.
“The easements for smaller schemes are welcome, as is the provision of a standard template that schemes can populate.
“The focus on proportionality in the consultation is also positive although we remain concerned that many schemes will inevitably need to provide lots of new information compared to current valuations, including in relation to covenant, which could prove burdensome for some. We will now consider the consultation carefully before responding next month.”
Barnett Waddingham principal and senior consulting actuary Mark Tinsley adds: “The Statement of Strategy is a key piece of the new Funding Code puzzle and so it is pleasing that momentum is being maintained as the September ‘go live’ date draws nearer.
“After being criticised in the wake of the 2022 gilts crisis, it appears TPR plans to use the change in funding regime to significantly increase the amount of data it collects from schemes at each valuation. While understandable, there is a danger that this drive to become a more data led organisation could result in significant extra costs for schemes.
“Thankfully, it seems as if TPR is being mindful of this in the main, with a less burdensome approach proposed for well-funded and small schemes. However, there are still instances where the amount of work does not appear justifiable and further reflection from TPR is required.”
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