Back in July 2022, DWP published a consultation on the detailed regulations which would govern DB funding, arising from the 2021 Pension Schemes Act. Respondents had 12 weeks to send in their comments, with the consultation closing on 17th October 2022. But over five months later the Government is yet to say how it will respond. Since the regulations were published, there have been two new pensions ministers and these changes in key personnel are likely to have contributed to the delay in responding.
Critics of the proposed regulations argued that the new legal framework would be overly rigid, giving insufficient flexibility to reflect the specific circumstances of individual schemes, and could force schemes to de-risk unnecessarily rapidly. Respondents also pointed out technical problems with the regulations such as the definition of ‘significant maturity’ which could be highly volatile, and DWP is widely expected to come up with a revised definition in due course – but in the meantime pension schemes still have very little idea about the timeframe over which they are going to be required to derisk.
Since the DWP consultation was published, TPR has now carried out its second consultation on its proposed DB Funding Code, which ran from December 2022 and closes today (24th March) but TPR made it clear that they would need to make further changes to the proposed Funding Code once it saw the outcome of DWP’s consultation. This means that everything is on hold until DWP decides on the shape of its final regulations.
Now LCP is calling on the government to publish their response and confirmation of the expected timings so that pension schemes and their sponsoring employers can plan for the future with certainty, especially in cases where the new funding regime might imply a significant change to existing funding and investment plans.
Commenting, Jon Forsyth, partner at LCP said: ‘Whilst consultation is welcome, it is time for decisions to be made. We hope that the delay in responding means that the DWP has listened to the criticisms that we and others have made and will come up with a set of regulations which are much more flexible than the first version. But the industry cannot go on waiting indefinitely. These new rules could have big implications for schemes and the firms who stand behind them, and they need decent notice of what the new rules will be and when they will be implemented. TPR is also in a difficult position having to wait on DWP until it can finalise its own funding code, so it is vital that DWP unlocks this legislative limbo’.
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