New pension funding regime in force – 22 September 2024
The new statutory funding regime for defined benefit (DB) pension schemes applies to actuarial valuations from 22 September 2024. It requires a "funding and investment strategy" to a self-sufficient end point. Trustees must prepare, agree with the employer, and submit to the Pensions Regulator (TPR) a written "statement of strategy" with the scheme's actuarial valuation. See our previous update on DB funding here for more detail.
Revised Funding Code: Mind the gap?
Sitting alongside the revised legislation are a number of other important elements, including TPR's revised Funding Code of Practice ("Code"). TPR has now published a final version of the Code, which is expected to come into force in November. This sets out key material, such as the end date for a pension scheme to be fully funded (which, unlike the Code generally, has legislative force).
TPR recently issued a statement that it expects schemes to use the revised Code from 23 September 2024, notwithstanding that (owing to delay caused by the General Election) the Code has not technically come into force. If your scheme has a valuation date which falls in this "gap", you may wish to take legal advice on the appropriate approach to take if your scheme valuation starts to run up to its statutory deadline.
Interim response on the statement of strategy
TPR has also issued, as part of an interim response to its consultation on the statement of strategy, four statement of strategy illustrative templates. These are designed for trustees when submitting the statement of strategy under the new regime to TPR.
Important TPR guidance on assessing the employer covenant under the new regime is finally expected to later in the Autumn.
Please speak to your usual Baker McKenzie contact for help with the legal and strategic aspects of long-term funding and scheme liability planning from an employer or trustee perspective, whether surplus or deficit management, or long-term run on or risk transfer strategies.
