DWP launches consultation on DB scheme funding 

July 29, 2022

The UK’s DWP aims to create clearer funding standards while supporting trustees and employers in planning their scheme funding over the long term

The Department for Work and Pensions (DWP) is seeking consultation on The Draft Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2023. 

The new draft regulations include new arrangements focussing on ensuring that pension benefits can be paid over the longer term. 

It details that all members should have the best possible chance of receiving the pensions they have been promised. 

Maturing schemes will be required to manage their risks carefully, taking account of the extent to which the risks remain supportable as they move towards run-off, or securing members’ benefits.  

Read Minerva's previous coverage of DWP developments:

https://www.old.manifest.co.uk/dwp-launches-taskforce-for-social-risks/

Additionally, the draft regulations are set to take account of open schemes which are not maturing and have adequate ongoing sponsor support.  

Guy Opperman, the UK’s MP minister for pensions and financial inclusion, explains: “It is not our intention that such schemes should have to undertake inappropriate de-risking of their investment approaches.” 

According to Opperman, the intention is to have better, and clearer, funding standards, but not to move away from the strengths of a flexible scheme specific approach. 

The consultation follows on from last year’s Pension Schemes Act 2021  requiring defined benefit occupational pension schemes to have a funding and investment strategy. 

Under this, defined benefit pension schemes must set out and submit a statement of strategy to UK’s watchdog, The Pensions Regulator. 

Opperman suggests while the majority of schemes are well run, plan for the future and manage their risks effectively, this standard of best practice is not universal.  

“With millions of people still relying on defined benefit pensions, it is important that we get the right balance between ensuring those pensions are secure for members over the longer term and keeping them affordable for sponsoring employers,” Opperman adds. 

The consultation, aimed at trustees and managers of defined occupational pension schemes, among other pension industry professionals and interested parties, also invites comments on the proposals to amend the Occupational Pension Schemes (Scheme Funding) Regulations 2005. 

It also sets out the new requirement for defined benefit schemes to appoint a chair where they do not already have one.