Scheme funding regime: final pieces fall into place

Eight months into the new scheme funding regime, The Pensions Regulator has published a final consultation response on statements of strategy, and has launched an associated online service.

Statements of strategy

Statements of strategy are the two-part documents which record trustees' long-term funding and investment plans (part 1) and supplementary matters (part 2).

TPR issued a consultation as to the form and content of statements of strategy in March 2024, and published an interim response in September.

The final response indicates that, in some respects, the regime will be less onerous than originally proposed. Key points which emerge include the following:

• The "small schemes" test will be (broadly) 200 or fewer DB members. There are various easements for small schemes, including new ones outlined below.
• A lighter-touch approach will be taken as regards asset allocation data.
• Small schemes using TPR's "fast track" route will not need to provide detailed information about the employer covenant. Nor will "low risk schemes". A scheme will be "low risk" if, for example, it is using fast track and has a surplus on the low-dependency basis even after applying the fast-track stress test.
• Trustees will not (as originally proposed) specify their planned endgame by choosing from pre-set options. Instead there will be a free-text box.
• Requirements as to journey plans and de-risking have been simplified, and there will now be more flexibility.
• Requirements as to cashflows have been relaxed. In particular, small schemes and schemes using fast track will not be required to submit cashflow information.
• TPR has simplified its four templates for statements of strategy, slimming down the information required.

"Submit a Scheme Valuation" service

Under the new online service, trustees will need to complete a dynamic spreadsheet in order to generate their statement of strategy.

Trustees must use the service to submit their spreadsheet and valuation to TPR. Trustees may need to submit further documents, depending on the circumstances: a fast-track confirmation; assessments of affordable contributions and supportable risk; and/or a recovery plan and schedule of contributions.

Comment

It is good to see TPR rowing back on some of its previous proposals. The easements for small and low-risk schemes are particularly welcome. This is in keeping with TPR's recent pledge to reduce the regulatory burden so as to support UK growth.

Note that the points discussed here apply only to valuations under the new regime (effective date on/after 22 September 2024). For valuations under the old regime, the requirements are different, and submissions should be made using TPR's existing Exchange service.