With increased political scrutiny (following BHS and Carillion etc.) the proposed Pension Schemes Bill introduces a new funding requirement for schemes to have a long-term objective (“LTO”). This is very sensible and most of our clients have already established a long term framework that goes far beyond the statutory actuarial valuation requirements, recognising that the Recovery Plan (“RP”) target of full Technical Provisions (“TP”) funding is not “job done” as schemes then need a clear “journey plan” to actually deliver members’ benefits over time.
However, the detailed approach proposed by the Pensions Regulator (“tPR”) in its recently closed first consultation on a new Funding Code appears designed to increase the scope for tPR to intervene and to steer away from the true prevailing 2004 statutory funding requirement for UK DB pension schemes. Our response to the consultation highlighted a number of issues with the proposals, the key points of which we outline briefly in this paper.
Although these changes may only become effective in 2022, tPR and advisors are already front- running these ideas with trustees to put pressure on sponsors. It is therefore essential that sponsors are proactive to avoid costly consequences in the short term.