DWP launches consultation on DB funding regulations

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.

The consultation is also seeking views on plans to amend the Occupational Pension Schemes (Scheme Funding) Regulations 2005, and a new requirement for defined benefit (DB) pension schemes to appoint a chair where they do not already have one.

Under the draft regulations, DB schemes will be required to have long-term plans set out in a funding and investment strategy, which they will also be required to submit to The Pensions Regulator (TPR).

The measures are expected to help contribute towards "clearer funding standards" and to support trustees and employers in planning their scheme funding over the long term, by requiring trustees to report progress against scheme targets.

Indeed, commenting in the foreword, Pensions Minister, Guy Opperman, stressed that it is not the DWP's intention to push schemes to undertake "inappropriate de-risking of their investment approaches", but rather to have "better, and clearer, funding standards".

Opperman stated: “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 DB schemes. Our new measures will help ensure they are protected for the long-term.”

In addition to this, TPR is expected to be able to intervene more efficiently to protect members under the draft regulations, as the regulator will be able to step in and engage where schemes appear to be falling short of the legal requirements.

The launch of the consultation has also helped to assuage fears that the regulator's revised timeline for the DB funding code to be operational by September 2023 could be 'under pressure', with a consultation on TPR's updated code now expected in autumn.

Commenting on the draft regulations, TPR chief executive, Charles Counsell, said: "I welcome the proposed measures which will help trustees to focus on long-term planning and risk-management, reflecting the good practice that many well-run DB schemes already demonstrate, and enable TPR to regulate DB scheme funding more efficiently and robustly in the future.

“We will now take into account the draft regulations as we shape our new DB Funding Code of Practice, which we expect to consult upon in the autumn.

"We want schemes to have the continued flexibility on funding to suit their circumstances, while improving journey planning and security for pension savers over the long term.”

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