A new consultation on measures to boost protections for members of defined benefit (DB) pension schemes has been launched by DWP today
Under the proposals, DB schemes will be required to have long-term plans set out in a funding and investment strategy, with these plans also submitted to The Pensions Regulator (TPR).
The consultation follows the passage of last year’s landmark Pension Schemes Act, which set out the framework for the new regulations, as well as an engagement programme with stakeholders connected with a range of schemes.
Almost 10 million people across the country remain in DB schemes, with around one million of those still actively paying into one. Collectively, DB schemes manage a total of approximately £1.7 trillion worth of assets.
The proposed measures will contribute towards clearer funding standards and support trustees and employers to plan their scheme funding over the longer-term, embedding good practice already seen in the market, as well as requiring trustees to report progress against scheme targets.
Minister for Pensions Guy Opperman said:
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 nether ‘one size fits all’, nor about micro-managing schemes. Every scheme will be treated on its merits.
Millions of people rely on defined benefit schemes. Our new measures will help ensure they are protected for the long-term.
The plans will also enable TPR to intervene more efficiently to protect members when needed – schemes will submit a statement of strategy alongside a scheme valuation. Where a scheme appears to be falling short of its legal requirements, the Regulator will be able to step in and engage with the scheme to ensure compliance and boost member security.
Charles Counsell, Chief Executive of The Pensions Regulator 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 defined benefit (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.
The DWP consultation also seeks input on additional proposals which would require DB schemes to appoint a Chair, where they do not already have one.
The consultation will run for 12 weeks from 26th July 2022, with DWP particularly seeking feedback from trustees and managers of DB schemes, sponsoring employers, industry professionals, scheme members, and other stakeholders.
The full consultation can be found here.