Investment perspectives - summer 2019
A journey plan towards the ultimate destination
02 Sep 2019
Trustees will be aware that The Pensions Regulator (TPR) is busy working on a more prescriptive DB code of practice on scheme funding.
We expect a shake-up across the industry, as TPR aims to implement measures which will “optimise” scheme funding in the wake of several high profile corporate failures, and provide itself with new and improved regulatory powers to intervene when expectations are not met. These include:
- A more directive approach for setting funding strategy – either “comply” or “explain”;
- A focus on risk management – a further push for integrated risk management (IRM) to become standard industry practice;
- More regulatory scrutiny – with serious penalties;
- More governance reporting – via a DB Chair’s Statement; and
- Setting of long-term funding objectives – trustees and sponsors will need to consider their ultimate long-term goal and set a clear plan for getting there within a realistic timescale.
With that in mind, trustees and sponsors should not fall into the trap of considering scheme funding in isolation from the investment strategy being run. In a “comply or explain” world, many of the flexibilities on funding could be locked down, and investment is the area we see with the greatest potential to add value. Rather like determining how and where to take your summer holiday, we see the following factors as being critical to the success:
- Understanding your maturity – a key driver of ending up at the right destination;
- The journey plan – focus on how you’re going to get there; and
- Resources at your disposal – these need to be managed and spent wisely.
Download the full article here where we go into more detail about each of the factors above.
This article is from our Summer edition of Investment Perspectives - you can access the full publication here.