The pensions and financial services consultancy’s new interactive tool combines elements such as a scheme’s employer covenant, scheme maturity and funding and investment plans to assess how the scheme’s current strategy compares against each of the TPR’s proposed Fast Track tests. The results give trustees and sponsors a better idea of whether their current strategy would enable them to take the Fast Track route, what aspects pass or fail and what any additional cost of Fast Track compliance could be.
By identifying where they need to take action early, schemes can ensure that any changes are implemented smoothly at both a strategic and operational level. It can help them think about how to evolve recovery plans, investment strategy and contingency planning to meet regulatory expectations. It can also help test the impact of any change in covenant or funding.
Explaining the need for the guidance provided by the tool, Laura McLaren, Partner, Hymans Robertson, says: “A new code of practice for scheme funding is on the horizon with a need to choose whether to go down the ‘Fast Track’ or ‘Bespoke’ route. Fast Track will be the most straightforward compliance route but could increase pension contributions significantly, so the decision must be made carefully. This tool will help support schemes in preparing for that decision and guide them on how to plan and prioritise their next steps.
“Under the new code, scheme maturity is also going to become much more significant. Schemes will need to set their funding and investment strategies with an increasing focus on the long-term objective. Ensuring they’re on the right path can help schemes make the best decisions today.
“In recent months, the COVID-19 outbreak has had a widespread effect on financial markets. Many schemes have seen drops in funding level of over 5%, meaning funding is now behind plan. COVID-19 will also have had an adverse impact on the employer covenant for many companies and, subsequently, mapping strategies across to the new framework may have become more challenging. By helping schemes make sense of the new funding code in the context of their own scheme circumstances, this tool will help guide them in understanding the different options open to them, helping to navigate both the current challenges and longer-terms plans.”
The tool can be found here
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