The landmark Pension Schemes Act 2021 made our pensions safer, better, and greener.
For defined benefit (DB) pension schemes, the Act strengthened the existing funding regime, requiring DB schemes to have a funding and investment strategy set out and for this to be submitted to The Pensions Regulator (TPR).
Almost ten million people across the country remain in DB schemes, with around one million of those still actively paying into one.
We want to ensure schemes are delivering for these savers, wherever they are in their retirement journey. And while most DB schemes are well run, plan for the future, and manage their risks effectively, best practice is not universal.
That's why we're building on last year's progress with new rules and a new consultation, which launches today (26 July).
The consultation outlines new proposals which will help ensure DB pension benefits can be paid over the longer term - and ensure that all members have the best possible chance of receiving the retirement income they have been promised.
The plans will also enable TPR to intervene more efficiently to protect members when needed. Schemes will submit a statement of strategy alongside a scheme valuation. Where a scheme appears to be falling short of its legal requirements, the regulator can now step in and engage with the scheme to ensure compliance and boost member security.
Collectively, DB schemes manage a total of approximately £1.7trn worth of assets. The asset landscape within these schemes is, however, highly fragmented.
Seven per cent of schemes have more than 5,000 members, but these schemes hold approximately 74% of total DB assets. In contrast, more than a third of schemes have fewer than 100 members, and these schemes collectively hold around 1% of total assets.
We are committed to ensuring the DB framework works well for this great variety of schemes and sponsors, and the launch of this consultation follows not only last year's Pension Schemes Act, but an engagement programme with stakeholders connected with a range of schemes, including open DB schemes.
Schemes that are maturing will be required to manage their risks carefully, taking proper account of the extent to which those risks remain supportable as they move towards securing members' benefits (or run-off).
Our proposals also take account of open schemes which are not maturing and have adequate ongoing sponsor support. It is not our intention that such schemes should have to undertake inappropriate de-risking of their investment approaches.
The intention is to have better - and clearer - funding standards, but not to move away from the strengths of a flexible scheme-specific approach. It is nether ‘one size fits all', nor about micro-managing schemes. Every scheme will be treated on its merits.
Millions of people rely on defined benefit schemes. Our new rules will help ensure they are protected for the long-term.
Guy Opperman is pensions and financial inclusion minister