Part 5: Further provision relating to pension schemes Scheme funding Schedule 10: Funding of defined benefit schemes 221A Funding and Investment Strategy
Paragraph 2 inserts a new section 221A into the Pensions Act 2004.
	Subsection (1) of section 221A imposes a duty on trustees or managers to have a funding and investment strategy for the purpose of ensuring pensions and other scheme benefits to and in respect of members can be paid over the long term. In the White Paper we described this as a long term objective for the scheme.
	Subsection (2) of section 221A sets out what the strategy must cover, including the planned ‘funding level’ of the scheme on the relevant date or dates, and the planned investments to be held by the scheme on those dates.
	Subsection (3) makes clear that the funding level is the ratio of assets to liabilities and provides for regulations to set out how ‘relevant date’ is determined.
	Subsection (4) makes provision for regulations which may make provision:
	to require trustees or managers to take into account prescribed matters and follow prescribed principles when determining the funding and investment strategy relating to the scheme. For example, the regulations may require information in relation to the scheme’s maturity, whether it is open or closed and the financial strength of the sponsoring employer. Factors such as these will affect the timeframe, funding levels and investments which are held;
	for the level of detail required in the strategy;
	to set how long trustees have to determine their strategy; and
	to specify when trustees should review and if necessary revise their strategy – for example, the regulations could be used to require trustees to review their strategy annually.
	Subsection (5) makes clear the matters and principles trustees may be required to take into account includes the actuarial methods or assumptions used to determine the funding level.
	Subsection (6) means that trustees who do not have a funding and investment strategy which complies with the requirements in new section 221A could be subject to a civil penalty where they have not taken all reasonable steps to ensure compliance: this could be up to £5,000 for individuals and up to £50,000 for organisations.