Pensions Regulator issues its 2024 Annual Funding Statement for DB Schemes together with its Corporate Plan 2024-27

The DB Funding Statement 2024

The Regulator has issued its DB Funding Statement, which is aimed primarily at schemes with valuation dates between September 22, 2023, and September 21, 2024, or “Tranche 19 schemes”. However, the statement is also relevant for schemes which have been significantly impacted by the “changes in market conditions” in recent years, and therefore need to review their investment strategy.

The key points are:

• Most schemes have seen material improvements in funding levels, with half of schemes expected to have exceeded their estimated buy-out funding levels.
• Where funding has improved, trustees should take the opportunity to reassess their long-term objectives.
• The statement sets out a range of options for those schemes that are well-funded, including targeting surplus generation, consolidation or buy-out with an insurance company.
• Schemes which are in deficit should consider their employer covenant and focus on a recovery plan, factoring in affordability for the employer.
• The new DB Finding Code, along with a consultation on revised covenant guidance, is expected “over the summer” and the Regulator urges trustees to take steps now to comply with the new funding regime.

The new funding regulations and DB code will apply to schemes with effective valuation dates from September 22, 2024, onwards, so this is the last funding statement from the Regulator under the current regime.

The Regulator’s Corporate Plan 2024-27

The Regulator’s Corporate Plan for the next three years was published on May 3, 2024. The Plan sets out the Regulator’s vision to drive forward a raft of measures including scheme preparation for pensions dashboards, the value for money framework, the new DB funding regime and scheme consolidation.

Another key plank of the Regulator’s vision for the next three years is to raise the standards of trusteeship by ensuring trustees have an effective system of governance. This includes developing a framework for the oversight of professional trustee firms, along with a trustee register.

In the second and third years of the Plan, the Regulator will focus on collaboration with the industry and Government to progress the recently proposed solution for deferred small pot consolidation.

The Regulator has laid out an ambitious schedule for the near future and the Plan details how it will address the current challenges to protect savers, enhance the pension system and support innovation.

Our May briefing will take an in-depth look at this year’s funding statement, as well as the Corporate Plan.