Trustees can now plan valuations to ensure they have everything they need to complete their Statement of Strategy

In March this year, The Pensions Regulator (TPR) launched a consultation on the Statement of Strategy, which is the formal documentation that all schemes will be required to submit at the end of the valuation process in the new defined benefit (DB) pension funding regime.

Today, TPR issued its interim response with a fuller response to the consultation set to be published this coming winter.

• Statements must be submitted in digital form.
• Schemes will have to submit much more information than ever before and will require input from actuarial, investment and covenant advisers, though there has been a reduction in the amount of information that schemes will be required to give, particularly for well-funded schemes when it comes to covenant -related information.
• The new requirements still include the need for some schemes to provide projected future benefit cashflow data – though the latest proposals from TPR remove this requirement for all Fast Track schemes, as well as for small schemes whether they follow a Bespoke or Fast Track approach, and limit the information to a more manageable level.

Richard Soldan, LCP Partner and Head of LCP’s DB funding group commented, “It’s great to see the latest thinking from TPR and helpful that they have listened to the general mood of the industry, reducing the level of information many schemes will need to provide to a more proportionate level. I’m pleased they have also recognised the position of open schemes more explicitly.

“Trustees will need to consider at an early stage the full list of data that they will need to submit, particularly if they expect to take a bespoke approach, to make sure they cover all the requirements efficiently as they go through the valuation process.

“And while we have the details about the data schemes we will need to submit, we won’t know exactly how it will need to be provided until spring next year when TPR’s new digital system is up and running. It’s really important that TPR ensures the new system is easy to use, to ease the burden on schemes.”

Helen Abbott, LCP Partner and covenant adviser, added, “It’s good that TPR has introduced a category for low-risk schemes, which will now only have to submit limited covenant information. It’s also helpful that some of the numerical covenant values can be calculated and expressed more pragmatically within the statement. But trustees will still need to consider the new covenant metrics introduced by the new funding regime in line with the legal requirements in the regulations and the principles in the code, which will often require more analysis than trustees have carried out in the past.”