The Department for Work and Pensions (DWP) has launched a consultation on the draft Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2023.
Under the proposals in the consultation, defined benefit (DB) schemes will be required to have long-term plans set out in a funding and investment strategy, with these plans also submitted to the Pensions Regulator (TPR). This will involve submitting a statement of strategy alongside a scheme valuation. Where a scheme appears to be falling short of its legal requirements, TPR will be able to step in and engage with the scheme to ensure compliance and boost member security.
The consultation also seeks feedback on an additional proposal to require DB schemes to appoint a chair if they do not have one already. The consultation will run for 12 weeks from 26 July 2022.
The purpose of the regulations are to help ensure that DB schemes are adequately funded. Minister for Pensions Guy Opperman said:
”Most DB schemes are well managed. However, despite the safeguards in place, best practice is not universal.”
”Our intention is to have better – and clearer – funding standards, whilst retaining the strengths of a flexible, scheme-specific approach. It is neither ‘one size fits all’, nor about micro-managing schemes. Every scheme will be treated on its merits.”
”Millions of people rely on defined benefit schemes. Our new measures will help ensure they are protected for the long-term.”
TPR previously launched a consultation on the DB funding code of practice in 2020. TPR revealed in its Corporate Plan 2022 to 2024 that it plans to launch a second consultation on the funding code of practice but wants to take the opportunity to learn from the DWP’s consultation on draft funding and investment regulations first.
Now that the DWP has launched its consultation, it is expected that the second TPR consultation will take place in the autumn with TPR’s DB funding code being operational by September 2023 as planned. Trustees should monitor the requirements and timeline of the DB funding regulations and TPR code in order to be prepared to be compliant.