Recommendation 18

HM Government Accepted

The requirements of the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 will encourage trustees to take a long-term approach and think about their end game strategies. Reporting on their approach in a statement of strategy will also encourage them to articulate the risks to their long-term funding strategy, improve transparency and provide oversight over how trustees manage their end games. Schemes’ funding and investment strategy must set out the way that pension benefits will be provided over the long term, which could be through buy out with an insurer. There is no requirement for schemes to seek buy out or enter a consolidator. Continuing to run on with an employer will still be an option available to schemes. The statement of strategy, which must be submitted to TPR, will include the trustees’ assessment of implementation of the scheme funding and investment strategy as well as reflections on key decisions and lessons learned. This will encourage greater transparency in decision making in DB schemes and help TPR to assess whether schemes’ risks are being managed effectively. TPR will be considering how it updates the information it publishes to the market in light of these new requirements, for example through providing aggregated information in its annual scheme funding publication. Pension Protection Fund and Financial Assistance Scheme PPF’s success in building reserves has led to calls from industry to review how the levy is collected. In anticipation of the twenty-year anniversary of the foundation of the PPF, the Department is working closely with the PPF to examine how we can future-proof the DB pension compensation reflecting the current changes to the DB landscape. That is why, on 30 January 2025, this Government announced that we will consider giving the Board of the PPF greater flexibility to adjust the annual pension protection levy it collects from private sector occupational DB pension schemes. This Government has heard significant calls to review the level of compensation received by PPF members and assistance from the FAS, specifically in relation to the award of pre 1997 indexation. The Minister for Pensions has met PPF and FAS members who have been affected by the lack of protection from inflation and has heard firsthand the very real impacts and difficulties they have experienced, particularly for pensions accrued before 1997. Any change in this area has significant implications on public finances for both the taxpayer funded FAS and for the PPF which is levy- funded. Assets and liabilities for the PPF are reflected within the Government accounts, and any use of the PPF reserve and increases in future liabilities have an impact on the public finances. Ministers continue to take advice on options, we will need to work through the issues to ensure a balance can be struck between all parties, including the interests of members of failed schemes, the levy payers who support the PPF and taxpayers. This is an important issue, and one where we will continue to work with PPF.