TPR to launch two consultations on DB funding

The Pensions Regulator (TPR) has said it will launch two consultations over the next year to give a clearer idea on how defined benefit pensions should be funded.

In a blog post published last Thursday, 9 May, TPR executive director of regulatory policy, analysis and advice, David Fairs, said that the first consultation, expected this summer, will focus on a “clearer framework for DB funding”.

Additionally, TPR will be running a second consultation on the draft funding code next year, “once we have more clarity on the intended primary and secondary legislative package”.

The new clearer framework and funding code are a result of the defined benefit white paper published in March 2018, which aimed to deliver a long-term strategic focus for schemes as they start to mature.

Fairs wrote: “We plan to consult on options for a clearer framework, including what we see as a suitable long-term objective. For closed schemes, this will include ideas on how they should seek to progressively reduce their reliance on the employer covenant over time and reach a position of low dependency by the time they are significantly mature.

“This will also provide trustees and employers with a good platform to pursue strategies which are suitable for their circumstances, whether that’s buying out, entering a consolidator or running off on a low risk basis.”

The regulator said it will be consulting on clearer parameters around journey plans and technical provisions based on scheme specific factors and will also seek views on whether stronger employers should be required to fund deficits over a shorter period.

“The new code will provide a more straightforward, fast track route to demonstrating compliance with requirements but there will be scope for schemes to choose a more bespoke approach subject to further evidence being provided and greater regulatory scrutiny,” Fairs said.

TPR also moved to reassure trustees that it is not pursuing a “one-size-fits-all” framework, but also needs to ensure they are not abused as well as greater transparency around the risks facing DB schemes.

“We expect that discussion on these matters will be robust. But it’s crucial that we have those debates to ensure the DB funding regime is fit-for-purpose for the future.”

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