Defined Benefit schemes: funding
The scheme funding provisions deliver the Government’s commitments in the White Paper ‘Protecting Defined Benefit Pension Schemes’ 7 to improve the system and to ensure it continues to protect members’ Defined Benefit pensions in a maturing landscape. With most schemes closed, comprising fewer contributing members, or reaching a phase where pension scheme benefits only are being paid out, it is important trustees manage their funding and investment decisions with a clear strategy for ensuring pensions and other benefits can be provided over the long term. Although the White Paper showed most sponsors and trustees work well together and use the flexibilities of the current system reasonably, good practice is not universal. The new scheme funding provisions seek to help trustees to improve their scheme funding and investment decision-making and to strengthen the Pensions Regulator’s ability to take stronger, more effective, action to protect members’ pensions.
	The provisions:
require trustees to have a scheme specific funding and investment strategy, and for the Statutory Funding Objective to be achieved in the context of this strategy. The White Paper describes this as a long term objective, which could be to ‘run on’ with minimal employer support; to buy out with an insurer, or to enter a consolidator;
require trustees to explain to the Regulator their approach to achieving the strategy in a statement of strategy, including information on mitigating risks, submitted with the actuarial valuation - described as a Defined Benefit Chair’s Statement in the White Paper;
require the trustee board to appoint a Chair, who is responsible for signing the statement on behalf of the Board;
strengthen the Regulator’s scheme funding enforcement powers, enabling them to direct trustees to revise their funding and investment strategy if they fail to comply with their legislative requirements.
	New regulation-making powers, to be used with existing regulation-making powers, will ensure regulations can contain sufficient detail to support trustees and their sponsoring employers to be clear about what they are required to do.