Following our recent article on the Defined Benefit (DB) Funding and Investment Strategy Regulations (the DB Funding Regulations) (Finally here: The DB Funding and Investment Strategy Regulations - key points and actions (burges-salmon.com) which noted the missing pieces still awaited in relation to the overall DB funding picture, the Pensions Regulator (TPR) on Tuesday issued its Statement of Strategy (SoS) consultation.

Firstly to recap, the DB Funding Regulations require that trustees submit a SoS, alongside their actuarial valuation, as part of planning and managing their defined benefit scheme funding. It “forms part of a package of legislative and regulatory measures designed to improve the security and sustainability of defined benefit (DB) pension schemes.”. 

The DB Funding Regulations provide that the SoS will be divided into two parts: (1) the headline funding and investment strategy (the FIS); and (2) supplementary matters, including the trustees’ assessment of how successfully the FIS is being implemented and related risks, actuarial information, including a summary of the actuarial valuation and investment information relating to the current investment strategy.

Regulation 18 of the DB Funding Regulations requires the SoS to be submitted in a form as set out by TPR.  

As part of its consultation, TPR is proposing that:-

  • The SoS should be in a standard form and follow a set template (as provided for by Regulation 18), which TPR has provided in order “to make this process easier for trustees and to remove some of the compliance risk”; 
  • It will produce separate templates to reflect that schemes will have 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.
  • It will request less information from smaller schemes in acknowledgement that it is likely the effort and costs of complying is likely to be much larger for such schemes when viewed as a percentage of their overall pension assets or liabilities.

TPR is looking to confirm through the consultation whether:-

  • Their proposed approach raises any challenges or unintended consequences;
  • the proposed SoS template is clear and fit-for-purpose; and
  • there are any issues with trustees providing the supplementary information proposed to be included in the SoS.

Whilst TPR’s reassurance that it will expect less from both well-funded schemes and small schemes has been well received, nevertheless it is clear that completion of the SoS is going to be no small task and there has been some commentary already on the time it will take and associated costs in completing it, with some wishing to consider the value it will ultimately add. The bespoke SoS example provided by TPR is fairly length and clearly will be time consuming to produce as it requires a lot of new data to be provided. 

The consultation runs until 16 April 2024. 

Finally, just to note again that the other parts of the DB funding jigsaw (the DB Funding Code alongside the fast track parameters and the covenant guidance) are still to follow at some point over the summer months (as confirmed by TPR interim director of regulatory policy, analysis and advice, Louise Davey at the recent PLSA conference) although exactly when is not yet clear.