XPS says funding consultation sets hard deadline for schemes to reach strong funding targets
All schemes now need to have a long-term funding target, a plan to get there, and a plan for if things go wrong on the way. The Pensions Regulator has today issued its consultation on how it will regulate these new DB funding rules. It sets out the detail underlying the new requirement in the Pension Schemes Bill for pension risks to be well managed with a clear strategy.
XPS supports the comprehensive consultation. The consultation outlines a clear plan to protect members seeking to ensure they receive their benefits. It sets out the principles the Regulator will follow in policing the new rules. It also proposes a structure for those schemes that want it.
Wayne Segers, Head of Pensions Solutions at XPS Pensions said, "The consultation walks the tightrope of giving a detailed structure to those who want it while preserving flexibility for others, avoiding a regression to past, failed minimum funding rules. It is clear that a lot of work and thought has gone into the proposals.
I'd encourage all trustees and employers to read the summary. Some schemes will be ahead and some behind the new requirements. Importantly, it clearly shows the value of schemes having a detailed funding strategy. Crucially, along with the need to have a target there is now a hard deadline to get there.
Time is a valuable pension asset. Schemes naturally become better funded as members age. So the sooner schemes start, and the better their plans to manage risk, the more likely members’ benefits will be secured and the less likely employers will pay higher contributions than needed. Trustees will need to set firm funding targets with firm deadlines. If different from the new fast track approach they will also need hard evidence to show their approach is compliant.”
The consultation runs until the 2 June 2020.