As it is currently proposed, the Statement of Strategy would require most trustee boards to agree with employers how assets are intended to be allocated between ‘Growth’, ‘Matching’ and ‘Hybrid’ classes upon the scheme reaching significant maturity. TPR is consulting on the Statement until 16 April 2024, ahead of publishing the related Code of Practice on funding, expected in the summer. DB schemes will need to produce a Statement of Strategy for valuations with effective dates after 22 September 2024.
Craig Watson, partner and co-head of corporate investment at Aon, said: “In its response to the consultation on DB funding and investment strategy in January, the Department for Work and Pensions has been clear that, ultimately, trustees remain responsible for a pension scheme’s investment strategy and only need to consult the employer regarding it. However, agreeing a high-level investment strategy with the employer within the Statement of Strategy, setting out how the trustees intend to invest once the scheme is significantly mature, will naturally increase the degree of influence that scheme sponsors have on investment matters. “In recent years, we have seen a continued trend towards scheme sponsors being more engaged on the investment strategy from the trustee. In fact, more and more are beginning to recognise the benefits of independent advice to ensure proposals are aligned with the sponsor’s interests.”
Craig Weston continued: “The new requirements are likely to lead to more sponsors seeking their own advice before signing off on the intended long-term high-level investment strategy. This will be part of a broader discussion and a requirement to agree on the long-term objective of the scheme such as buyout, run-on or moving to a superfund.
“The impact of gilt yield volatility in the autumn of 2022 also demonstrated how fundamental investment strategy is for schemes in order for them to remain on course - and also the potential benefit that a second pair of eyes, offering an independent challenge, can provide in ensuring portfolios remain suitably robust.”
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