The updated free interactive tool reflects TPR’s latest proposals for the DB Funding Code coming into force for valuations from 1 April 2024. DB schemes can use the tool to assess how their current strategy compares against each of the TPR’s proposed Fast Track tests. It combines elements such as a scheme’s maturity and funding and investment plans to make the assessment. The results give trustees and sponsors a better idea of whether their current strategy would enable them to take the Fast Track route. Results include what aspects pass or fail, and estimates of the cost of meeting Fast Track. The tool can also help test the impact of any change in covenant or funding, and the sensitivity to TPR’s parameters.
The leading pensions and financial services consultancy has also created an online hub for those seeking information, and published a Fast Track factsheet. The factsheet outlines and explains the three Fast Track tests applying to technical provisions, recovery plan and investment stress. The three tests specify that technical provisions must be a minimum proportion of liabilities, recovery plans suitably short, and there are limits on investment risk.
Explaining the need for the hub, updated tool and new factsheet, Laura McLaren, Partner, Hymans Robertson, says: “Many schemes will be keen to start preparing for next April when TPR’s code comes into force for valuations. Although the changes won’t apply to valuations before then, it makes little sense to agree a funding framework without an eye on how it’s likely to work with the new Code.
“The decision whether to follow the ‘Fast Track’ or ‘Bespoke’ route must be made carefully. Despite Fast Track being the most straightforward compliance option, it could require significantly more pension contributions and may not be right for all schemes. However, those schemes that have seen funding improve over the last 12 months might find that it now looks more achievable. TPR has still to set out in detail how it will regulate Bespoke, but the central concept is that schemes must be able to support risks to funding.
“The pensions landscape has changed a lot in the last year. Our resources published today will help schemes to make sense of the new funding code, taking into account their own circumstances and these many changes. They will help schemes to understand what the proposals mean for them. Understanding what the latest proposals mean for them will guide decisions today.”
The hub can be found here , the tool here and the factsheet here.
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