This statement provides more detailed guidance on how schemes should approaching forthcoming valuations. It is particularly relevant to schemes conducting valuations from 22 September 2018 to 21 September 2019.
TPR says trustees and employers should be agreeing a clear strategy for achieving their long term goals.
This will involve recognising how the balance between investment risk, contributions and covenant support may change over time, particularly as schemes become more mature and potentially better funded.
A comprehensive approach to integrated risk management should allow schemes to ensure they only take an appropriate level of risk with investments.
TPR says trustees should be mindful of the additional deficit that could arise from their chosen investment strategy and whether their covenant could support it. For the first time, and following feedback from trustees and advisers, this annual funding statement includes TPR expectations on various investment strategies.
Since the majority of schemes are closed to new members, TPR says it expects scheme maturity issues to assume greater significance for setting funding and investment strategies in the future.
TPR’s executive director of regulator policy, David Fairs says: “In order to support schemes we are setting out what we expect trustees and sponsoring employers to consider on funding, investment and covenant.
“The AFS will help them think about the risks facing their scheme, to consider what levels of risk are acceptable and how to mitigate risks where appropriate.
“Trustees have fed back to us that they find this clarity helpful in negotiating good outcomes for members and avoiding interventions and action from TPR.
“We have taken a tough stance on schemes that have not been treated fairly and will continue this approach where members’ benefits are under pressure.”
As part of its new regulatory approach, TPR is contacting many more schemes before triennial valuations are submitted to identify potential risks which could impact on members. Areas that will be looked at include equitable treatment of members and long recovery plans.