Pensions: what’s new this week - September 30, 2024

TPR publishes statement of strategy templates

New funding requirements now apply to defined benefit schemes, under regulations that have effect for valuations with effective dates on or after 22 September 2024. The DB Funding Code is expected to come into force in November.

The Pensions Regulator (TPR) has published illustrative templates for the statement of strategy that must be prepared by trustees and submitted to TPR, providing variants for schemes whether they are in the period before or after their relevant date, and whether they are using the Fast Track or Bespoke valuation approach. TPR has also published a reference list of the relevant data and information items (with guidance and definitions of terminology used) and an interim response to its consultation on the statement of strategy, highlighting key changes made based on feedback – a fuller response will follow in due course.

TPR will launch a new digital submission platform for valuation information in spring 2025, to enable submission of the statement of strategy and other valuation documents under the new framework. TPR does not expect statements of strategy or other valuation information for in-scope schemes to be completed or submitted prior to the launch of that service, and if the launch of the platform is delayed TPR will not regard trustees as being in breach of the requirement to submit the statement of strategy ‘as soon as reasonably practicable’ after preparing their funding and investment strategy.

The interim response to the consultation highlights key changes to actuarial and investment information required, and states that some schemes will not be required to submit detailed covenant information as part of the statement of strategy. This applies to:

• Small schemes that meet the Fast Track parameters. The definition of small schemes for this purpose is: ‘Those with 200 members or fewer, excluding members who are eligible for lump sum death benefit only, for hybrid schemes those members with defined contribution (DC) benefits only and fully insured annuitants where they are not included in the calculation of the technical provisions liabilities’; and
• Schemes that:
  • Follow a Fast Track approach and would be in surplus on a low dependency funding basis after applying an immediate Fast Track stress test;
  • Follow a Fast Track approach and where full benefits for all members have been secured with an insurer; or
  • Follow a Bespoke approach which have reached their relevant date and would be in surplus on a low dependency funding basis after the application of an immediate stress test.

Publication of updated covenant guidance is expected ‘in the next few months’.

Read the statement of strategy information and templates.

Read the interim response to the statement of strategy consultation.

 

Pensions Ombudsman: expedited decision-making 

The Pensions Ombudsman has published a blog post commenting on progress with the development of its expedited decision-making approach which seeks to tackle a backlog of cases and cover increasing demand. The post cites three examples of cases that are likely to go through an expedited process:

• Where a pension provider supplied an incorrect benefit statement, but it is clear no loss was caused by the error;
• Where a scheme member is complaining that automatic fund switches in a lifestyling investment strategy cost them investment returns, but where it is clear that the default lifestyling arrangement was adequately communicated; and
• Where a member wants a scheme to honour a cash equivalent transfer value when the member was responsible for not meeting the statutory time limits.

In these cases, if all the information needed to make a decision is supplied in the application then an initial decision will be issued to all parties providing the caseworker’s view. If any party disagrees, the Ombudsman will issue a short Determination (if they agree with the caseworker’s view). The parties will therefore have a binding decision without going through the adjudication process. TPO requests any comments on how its operating model review could impact on a scheme’s internal processes and member communications.

Read the Operating Model Review blog post.

TPR publishes DB funding analysis 2024

TPR has published its annual overview of funding levels and recovery plans for UK DB and hybrid schemes, based on the tranche of schemes with effective valuation dates from 22 September 2021 up to and including 21 September 2022. The data shows an increase in the proportion of schemes in surplus and a reduction in recovery plan length for schemes in deficit, in each case compared to schemes in the parallel tranche three years previously, when these schemes would typically have submitted their previous valuation.

Read TPR’s DB scheme funding analysis 2024 report.