The Society of Pension Professionals (SPP) has issued guidance on the new requirements for Defined Benefit (DB) pension schemes introduced by the Pension Schemes Act 2021.
DB pension schemes will be required to establish a funding and investment strategy focused on achieving a low-dependency funding target, beginning September 22, 2024.
The Pensions Regulator’s new Code of Practice, effective after September 22, 2024, establishes statutory standards for long-term journey planning and risk management, emphasising covenant resources.
The SPP guidance provides key updates for Defined Benefit (DB) pension schemes, highlighting the importance of trustees revising their financing and investment strategies to align with the scheme’s covenant strength and maturity.
It highlights that trustees must update valuations and risk management practices to fit long-term goals, with compliance options through either fast track or bespoke routes available for after September 22, 2024 valuations.
The guidance also emphasises the importance of thorough covenant assessments, including cash flow and insolvency risks, and a clear understanding of dependent assets.
Additionally, trustees are also advised to develop a journey plan that is proportional to the scheme’s and employer’s circumstances, ensuring compliance with the new regulatory requirements.
SPP president Sophia Singleton says: “The SPP welcomes the fact that the DB Funding Code has now been laid before Parliament. However, there remains a degree of uncertainty and speculation about how schemes should adjust their strategies under the new regime.
“As a result, the SPP has produced this concise and insightful guide, which we believe will prove helpful in assisting a wide range of pension professionals, including trustees, actuaries, pension consultants and lawyers, in better understanding what’s now required.”
