Navigating the new Statement of Strategy: four templates and a 168 row spreadsheet!

The new Statement of Strategy consultation from TPR contains a spreadsheet of data requirements that may seem overwhelming. This blog gives an overview of the proposals.

On 5 March 2024, the Pensions Regulator launched a consultation on the Statement of Strategy – the formal documentation that all schemes will be required to submit at the end of the valuation process in the new funding regime.

This consultation, which closes on the 16th April, is relevant for all schemes, as unlike in the current regime, schemes in surplus will also be required to submit the information requested - and the Regulator has signalled its intention to use this document as the principal mechanism by which it will assess compliance within its new twin track regulatory approach to DB funding.

I’ve outlined the key points below.

What is the Regulator proposing?

The key proposals are that:

• The statement of strategy has to be supplied in a standard format and follow one of four set templates, varying by whether the trustees are submitting a Fast Track or Bespoke valuation and whether or not the scheme has reached its “relevant date” (the date on which the scheme reaches “significant maturity” – ie by then it should have low dependency on the employer).
• Different levels of information will be requested depending on whether trustees are submitting a “Bespoke” or “Fast Track” valuation, with the first approach requiring trustees to provide more detailed information on how their approach is compliant and risks are being managed. Similarly, more information about journey planning and how scheme maturity is expected to change over time will be requested from a scheme that has not yet reached significant maturity.
• In the interest of proportionality, some easements are proposed to the information to be requested from “smaller” schemes – defined as having less than 100 members when considering actuarial information and having less than £30m in section 179 liabilities when considering investment information.

The data requirements

The consultation pack includes a spreadsheet setting out an extensive data list of the information likely to be required for including in the statement. This is presented as a 168-row spreadsheet and includes:

• who of four separate parties – the trustees, scheme actuary, investment consultant and covenant adviser - is responsible for providing each data element
• whether the data item is mandatory or optional to provide
• whether it applies to schemes submitting Fast Track or Bespoke valuations (or both); and
• where the requirement is restricted to open schemes or those which have not yet reached their relevant date or those that are not classified as “smaller”.

The spreadsheet reminds us that all schemes will now be asked to select a long-term objective to report from one of buy-out, run-off, move to a superfund, move to an alternative consolidator or “other” (with free text to provide a brief explanation). The spreadsheet also highlights how much other new data all schemes will have to provide, for example around scheme maturity and long-term funding strategy, as well as investment strategy and some quite detailed covenant information – this may raise a few sponsor eyebrows. Some additional information around future accrual and maturity and active member cashflows will also be requested from trustees of open schemes.

The consultation pack also includes an example statement of strategy for a scheme making a Bespoke valuation submission before the scheme reaches significant maturity – a template for the statement that will apply in the scenario where the most information will need to be supplied – and a worked example illustrating how the Regulator expects maximum affordable contributions to be evidenced where there is a funding deficit to be repaired.

It is good to see that the consultation includes the development of standard templates, which should make it easier to comply with the new requirements. The proportionality easements for smaller schemes are also particularly welcome. However, it is clear that the statement of strategy requirements are likely to prove onerous for many schemes who will need to provide significant quantities of new information compared to current valuations, including some quite detailed sponsor covenant information for the first time.