TPR amends Statement of Strategy following consultation feedback

The Pensions Regulator (TPR) has considered industry feedback on the consultation of its Statement of Strategy, as part of defined benefit (DB) funding code reforms, and has introduced a number of amendments.

The Statement of Strategy forms part of the UK Funding Code which came into effect on 22 September 2024 and sets out the information trustees need to submit as part of planning and managing their DB scheme funding position.

The regulator has launched a consultation on its Statement of Strategy in March this year to understand whether the proposed document raises any challenges of unintended consequences and whether the template is clear and fit for purpose.

Digital submission

In its response to the consultation, TPR said that trustees must submit their statement of strategy to TPR as soon as “reasonably practicable” after having prepared or revised their funding and investment strategy and the submission must be done in a digital form.

The regulator said it is enhancing its digital service to make the process for submitting valuations “more reflective of how users engage with us”, adding that it aims to do so while ensuring it captures the information it needs to identify emerging risks and respond in targeted way. It expects to launch the new digital service in spring 2025.

When the new service is available, TPR said it expects trustees to use this to submit their statement of strategy along with a copy of their scheme’s actuarial valuation.

If the scheme is in deficit, the regulator said it will expect it to provide a copy of the schedule of contributions and its recovery plan. Schemes with valuation dates on or after 22 September should not use the regulator’s existing digital system, and it will not expect submissions until the new system is live.

Templates

TPR has also published four statements of strategy templates showing its data requirements to enable schemes to begin their valuation planning and processes ahead of the digital service launch.

This includes:

• Fast Track before the relevant date;
• Fast Track on or after the relevant date;
• Bespoke before the relevant date;
• Bespoke on or after the relevant date.

Changes

The regulator said it received 55 responses to the consultation, which it considered before making a “number of changes” to the information required to be submitted by schemes in the Statement of Strategy.

While the regulator expects to publish its final response later this year, so far the key themes include schemes having to submit “much more information” than ever before and will require input from actuarial, investment and covenant advisers.

However, there has been a reduction in the amount of information that schemes will be required to give, particularly for well-funded schemes when it comes to covenant-related information.

The new requirements still include the need for some schemes to provide projected future benefit cashflow data, however the proposals remove this requirement for all Fast Track schemes, as well as for small schemes whether they follow a Bespoke or Fast Track approach and limit the information to a “more manageable level”.

Richard Soldan, LCP partner and head of LCP’s DB funding group, said: “It’s great to see the latest thinking from TPR and helpful that they have listened to the general mood of the industry, reducing the level of information many schemes will need to provide to a more proportionate level. I’m pleased they have also recognised the position of open schemes more explicitly.”

He added that trustees will need to consider at an early stage the full list of data that they will need to submit, particularly if they expect to take a “Bespoke” approach, to make sure they cover all the requirements efficiently as they go through the valuation process.

While now there is detail about the data schemes will need to submit, Soldan pointed out that it is not yet known exactly how it will need to be provided until spring next year when TPR’s new digital system is up and running.

“It’s really important that TPR ensures the new system is easy to use, to ease the burden on schemes,” he added.

Helen Abbott, LCP partner and covenant adviser, added that it’s “good” that the regulator has introduced a category for low-risk schemes which will now only have to submit limited covenant information. Similarly, it is “helpful” that some of the numerical covenant values can be calculated and expressed more pragmatically within the statement.

However, she cautioned that trustees will still need to consider the new covenant metrics introduced by the new funding regime in line with the legal requirements in the regulations and the principles in the code, which will often require more analysis than trustees have carried out in the past.

Laura McLaren, head of DB scheme actuary services Hymans Robertson, added that the the changes have “moved the dial in the right direction”.

However, she added that completing the templates will still incur extra work as schemes need to set out plans and evidence in the format required, pointing out that example guides run to around 17 pages for Fast Track and 28 pages for Bespoke.

“Trustees and sponsors will need to factor this into upcoming valuation plans but at least now they have the certainty to meaningfully start to prepare,” she noted.

Mark Tinsley, principal and senior consulting actuary at Barnett Waddingham, said the regulator could have “gone further” but added that the regulator has introduced “several sensible easements” that will reduce the burden of producing the statement for many schemes.

But he agreed with McLaren in that the statement is still set to be a “sizeable document” that will require “significant” input from schemes.

He said: “It is therefore essential for the regulator’s promised new digital service to deliver a streamlined approach to submitting the valuation results.”

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