Pensions - Articles - Comments on TPRs Statement of Strategy consultation

With the new funding regime edging ever closer to the finishing line, Hymans Robertson and Sackers comment on TPR’s consultation on the new statement of strategy (“the Statement”) which closes today,16 April 2024. Forming an integral part of the new requirements for all DB schemes to have a funding and investment strategy, the consultation focused on the proposed form of the new Statement, including the extent of information that will need to be submitted (and evidenced) to TPR.

 Laura McLaren, Head of DB Actuarial Consulting, Hymans Robertson, said: “We’re glad to see TPR publish detailed guidance for the statement of strategy, but we’re concerned that completing the template as proposed will create a lot of extra work. We estimate a typical scheme could add 20% to its valuation costs as a result.

 “TPR can make completing the template easier, with pre-populated sections or automation where practical. But our main concern is around the amount of detail TPR is requesting. This would be onerous for schemes and disproportionate to what TPR needs to regulate them, especially in an environment with many well-funded DB schemes targeting buy-out.

 “As a submission for the regulator’s eyes only, the statement of strategy has little value for the schemes themselves beyond compliance. It would be helpful to know what TPR, as a ‘proportionate’ regulator, is going to do with all the information that schemes will submit.

 “The requirements for Fast Track in particular could be scaled back. Asking for so much information misses the point of what’s meant to be a regulatory ‘filter’. A better approach could be that, once TPR has screened schemes it wishes to investigate further, it can ask for more information where relevant.”

 Sacker’s partner, Eleanor Daplyn, comments: “We welcome TPR’s emphasis on taking a proportionate approach and desire to “streamline” the information collected through the new Statement. Accompanied by an example of what a Statement might look like, there are due to be four Statement templates, depending on a scheme’s maturity, and which of the two funding tracks, Fast or Bespoke, a scheme is running along.

 Whilst some concessions are made for smaller schemes, for most DB schemes, the Statement looks set to require extensive actuarial, investment and covenant input. With schemes having to delve deeper into the detail, there is a real risk of increasing the burden on already stretched schemes. Given the volume of DB scheme information gathered through the existing valuation process and annual scheme return, it remains to be seen just how useful TPR will find this new level of granularity.

 In addition, although having Statement templates seems sensible, it is essential that trustees are given sufficient flexibility to tailor the information (where appropriate) to reflect scheme specifics. In particular, a lingering area of concern relates to open DB schemes, as they will need latitude to explain their particular circumstances.”

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