DWP’s consultation on new regulations for DB scheme funding and investment

What you need to know

• The Department for Work and Pensions (DWP) has released its consultation on draft regulations supporting the forthcoming new requirement for trustees of defined benefit (DB) schemes to have a funding and investment strategy, as introduced by the Pension Schemes Act 2021. The closing date for responses is 17 October 2022.
• The draft regulations provide further detail on how to set the strategy and how this is to be reported to The Pensions Regulator (TPR). Whilst a scheme specific approach has been retained, all DB schemes will be expected to achieve full funding on a low dependency basis and be invested in low risk assets by the time they reach significant maturity. A key point that is unclear from the consultation is whether any deficit that persists at that date, or emerges after, can still be funded over time based on affordability.
• The proposals include, for the first time in legislation, regulations around matters to be considered when assessing covenant, and the consultation also considers whether removing deficits as soon as is affordable should be the primary factor for setting recovery plans.
• Details are also given on the forthcoming new requirement to appoint a chair of trustees, who would be responsible for signing the written statement of strategy.