The Pensions Regulator (TPR) has launched a consultation on the statement of strategy that trustees will need to submit as part of planning and managing their defined benefit (DB) schemes’ funding positions.
The news follows an announcement from TPR’s interim director of regulatory policy, analysis and advice, Louise Davey, that the UK Funding Code will come into effect from 22 September.
The statement of strategy was created following industry engagement last summer with the aim to minimise the administrative burden on trustees, TPR said.
TPR proposes that the statement of strategy should be in standard form and follow a set template provided by TPR. The regulator will also produce separate templates for schemes to provide slightly different information depending on whether they have reached the ‘relevant date’, or whether they are taking a fast track or bespoke approach.
TPR said it will request less information from smaller schemes.
Statement of intent
The example of the statement of intent requires trustees to set out a scheme’s long-term objectives including its long-term funding strategy, and long-term investment strategy. It said that trustees must also detail a plan on how scheme funding will progress under the funding journey plan, including outlining their current funding position, and how it is expected to progress towards full funding on a low-dependency basis at the relevant date, as well as discount rates used to determine a scheme’s liabilities.
Pension schemes will also be required to submit supplementary documents around trustee assessment, including the extent to which funding and investment strategy (FIS) is appropriate and implementation of FIS, as well as actuarial information, including an estimate of scheme maturity, evidence of how that estimate will change, summary of actuarial valuation and related recovery plan.
Pension schemes will also have to submit investment information, including current level of investment risk, evidence of liquidity, level of investment risk in their journey plan as well as evidence on which that assessment is based.
In addition, pension schemes will be required to submit covenant information, including an assessment of employer covenant and evidence on which that assessment is based on.
Consultation
Through the consultation, TPR said it wants to understand whether the statement of strategy raises any challenges of unintended consequences and whether the template is clear and fit for purpose. The regulator wants to also understand if there are any issues with trustees providing the supplementary information proposed to be included in the statement of strategy.
The consultation builds on TPR’s previous DB funding code consultations and runs for six weeks closing on 16 April.
Davey said: “Receiving statements of strategy will give us additional data to better understand journeys that schemes are on as they mature, improving our regulatory oversight.”
She said that 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.
TPR wants “a broad range of views”, she added, to ensure its 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,” Davey said.
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