DWP has today published its response to the consultation on the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2023, which includes the final version of the draft regulations due to come into force from April 2024 and to apply to scheme valuations from September 2024.
The draft regulations have been amended following the concerns raised during the consultation about ensuring full account is taken of the need for scheme specific flexibility, and include the following outcomes:
making clearer the flexibilities that were intended within the draft Regulations, such as not constraining actual investments, and emphasising that even mature schemes can invest in a wide range of assets;
providing assurance that the investment in the sustainable growth of sponsoring employers’ businesses is a matter to consider alongside the affordability principle;
making it explicit that open schemes can take account of new entrants and future accrual when determining when the scheme will reach significant maturity; and
making long-term planning and implementation easier and avoiding unnecessary administrative burden by, for example, giving the Pensions Regulator the flexibility to ask for less detailed information in some cases, depending on the circumstances of the scheme.
DWP has made it clear that the new funding regime is part of a wider government strategy to make scheme assets work harder for all parties, while keeping members’ benefits secure, having at their core the notion of setting a long-term destination for maturing schemes, such as insurance buyout, superfund consolidation, or running on with the support of a sponsoring employer.
The proposal to delay the application of the new Regulations to late Summer is a sensible one, as there will be much for the pensions industry to digest as regards their effect on future valuations.