TPR: Valuations until March 2022 done under current funding regime

Speaking at the ‘New pension funding regime’ webinar, presented by FT Live and sponsored by Mercer, the executive director of regulatory policy, analysis and advice at TPR explained that the second consultation on the new DB funding code and impact assessment is dependent on the pension schemes bill becoming an act, which will then allow the government to create secondary legislation.

He said: “We’re not in a position to do the detail around our second consultation until we have seen those regulations.

All the good things about integrated risk management that we’ve been setting out in our annual funding statement are behind the code, I think trustees need to embrace that

David Fairs, TPR

“Actuarial valuations only come under the new code after it’s been issued. For actuarial valuations that are being done at the moment and potentially those [conducted] in the first quarter of 2022, they are going to be done under the existing code. It’s really important that trustees understand that.”

Less than a year ago, TPR announced its plans for a new split approach to DB schemes funding, where schemes would have to opt between two choices.

Pension funds that opt for a prescriptive fast-track funding arrangement would be subject to less regulatory scrutiny, while those opting for a bespoke arrangement would face stricter oversight. 

David Fairs speaking about DB funding on the ‘New pension funding regime’.

Fairs was responding to Simon Turner, partner at Mercer, who noted that some schemes are in a “paralysis state” as they are waiting for changes in the funding code, and “this is leading to genuine real time pauses in things like derisking”.

Fairs added that there are some aspects for which trustees can work on during this period, as some of the concepts of the new DB funding code are present in TPR’s funding statement.

He advised trustees to think about having a long-term objective that is agreeable with the employer, considering “the journey plan on how you are going to get to that long-term objective and think what might throw you off course, and what the mitigations are to get you back on to it”.

“All the good things about integrated risk management that we’ve been setting out in our annual funding statement are behind the code, I think trustees need to embrace that.”

Fairs noted that “there are a lot of employers and trustees who are already doing those things and that’s terrific; they may fit into bespoke or fast-track valuations with very little work going forwards, where they already have that thinking in place”.

“But what we see at the regulator is that there are some schemes that don’t really do integrated risk management that well. Part of the thinking behind a new funding code is that it forces schemes’ thinking in that way.”

The webinar can be watched on demand for 30 days here.