Funding DB pension schemes in the charity sector

Published by Steve Hitchiner on

Most defined benefit (DB) pension schemes are closed to new benefits, and are steadily maturing towards their ‘endgame’.

From understanding what to do when a request is received, to assessing the strength of the employer convenant and how this impacts CETV options, this briefing note outline the actions trustees may wish to take.

Providing a bit of background, the consultation decided upon:

  1. A clearer framework for what constitutes an appropriate funding plan, including what TPR sees as an appropriate long-term objective.

  2. The concept of a ‘Fast Track’ route to demonstrating compliance, with scope for a more ‘Bespoke’ approach subject to greater regulatory scrutiny.

  3.  Clearer guidelines on the effect of the financial strength of the sponsoring employer, and also on acceptable periods for any funding shortfall to be corrected. 

The details are subject to consultation, and there is still a bit of time before the new regime is in force. However, the consultation will provide a clear steer as to TPR’s direction, and may be accompanied by statements regarding expectations for schemes currently undertaking a funding review. Therefore now is the time to review objectives and strategy, and at the moment, the main question for trustees and sponsors is where they expect to sit relative to a Fast Track approach or a bespoke one. 

Many charities have long histories and can expect to be around for the long-term, but may also have restrictions on the cash they can pay to their pension scheme in the short-term (particularly in light of the current Covid-19 pandemic) so need to ensure that risk and volatility is appropriately managed.

In this briefing note, these topics and challenged are addressed. Including what tools we can offer, to help you set your short and long-term endgame objectives and how to handle risk.

Download our briefing note

Fast Track Indicator

If you want to check how your funding plan compares to the Fast Track regime, you can use our Fast Track Indicator tool, which is available on our website. 

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Watch our webinar

We recently hosted a roundtable in with Charity Times to discuss DB funding issues in the Charity Sector. A write-up of this roundtable is available in the digital Feb/March 2020 edition of Charity Times.

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