According to the proposals, DB plans must have long-term plans detailed in a funding and investment strategy, and these plans must also be published to The Pensions Regulator (TPR).
The consultation comes after last year’s historic Pension Plans Act, which established the foundation for the new laws, and a programme of interaction with stakeholders associated with a variety of schemes.
Nearly 10 million people in the country are still enrolled in DB plans, with about 1 million of them regularly contributing.
The overall value of the assets managed by DB schemes is about £1.7 trillion.
The proposed changes will help to clarify financing criteria, assist employers and trustees in long-term financial planning for schemes, integrate market-proven best practices, and mandate trustee reporting on scheme target progress.
Guy Opperman, the minister for pensions, said:
Most DB schemes are effectively run. Nevertheless, despite the safety measures in place, best practices are not always followed.
Our goal is to improve funding standards and make them more transparent while keeping the benefits of a flexible, scheme-specific approach.
Neither “one size fits all” nor micromanagement tactics are appropriate. Every plan will be evaluated according to its merits.
Defined benefit plans are used by millions of people. Our new policies will contribute to ensuring their long-term security.
As a result of the plans, TPR will be able to protect members more effectively when necessary.
Schemes will submit a statement of strategy together with a scheme valuation.
The regulator will be able to intervene and work with the scheme to ensure compliance and increase member security when a scheme looks to be failing to meet legal standards.
The Pensions Regulator’s Chief Executive, Charles Counsell, said:
I applaud the proposed measures that will enable TPR to regulate DB scheme funding more effectively and robustly in the future by assisting trustees in concentrating on long-term planning and risk management, reflecting the best practices that many well-run defined benefit (DB) schemes already demonstrate.
As we create our new DB Funding Code of Practice, which we anticipate consulting on in the fall, we will now take the draught regulations into consideration.
While enhancing long-term travel planning and security for pension savings, we want schemes to maintain their funding flexibility to accommodate changing conditions.
In addition, the DWP is seeking feedback on new proposals that would mandate the appointment of a Chair for DB schemes where none now exist.
DWP will specifically be looking for feedback from trustees and managers of DB schemes, sponsoring businesses, industry professionals, scheme members, and other stakeholders.
The consultation will run for 12 weeks starting on July 26, 2022.