Pensions Minister, Paul Maynard, has confirmed that the new Defined Benefit (DB) Scheme Funding and Investment Strategy Regulations will include specific clarifications to address concerns around the impact on open schemes.

Work and Pensions Committee (WPC) chair, Stephen Timms, previously wrote to then-Pensions Minister, Laura Trott, to seek clarification on the government's plans to ensure the regulations are appropriate for open schemes, arguing that there are "important reasons to justify a different approach for open schemes".

In his response, Maynard said that, in developing the regulations and the new DB Funding Code, both the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) have been acutely aware of the need to take account of the specific needs of open schemes.

"We agree with the committee, and many within the pensions industry, that open schemes should not be forced into an inappropriate de-risking journey," he wrote.

"We had always intended flexibility for open schemes and are aware that this may not have been clear in the draft regulations that were consulted on."

In particular, Maynard confirmed that the DWP will be making it explicit in the regulations that open schemes can take account of both new entrants and future accruals in setting their funding plans.

TPR will also ensure that open schemes are more prominently referenced and highlighted in their revised code.

However, he argued that there is no need for separate arrangements, or indeed a separate regime, for open schemes, clarifying that while some schemes may technically be considered to be ‘open’ as they are admitting small numbers of new members, they are still nevertheless maturing, much like a closed scheme.

“To provide a separate regime for such schemes would leave the system open to inappropriate gaming and may not effectively protect members’ benefits, which is a fundamental cornerstone of our proposals,” he explained.

He also confirmed that, in the proposed regulations, the need to de-risk will be explicitly linked to the extent to which the scheme is currently or is likely to become more mature in the future, as well as on the strength of the sponsoring employer.

This scheme specific approach is expected to ensure that if an open scheme is not maturing, it will not get closer to the point at which it is expected to become significantly mature and will not therefore have to move towards low dependency.

This would mean that, where appropriate, open schemes can continue to invest in a significant proportion of long-term productive assets.

Maynard also reassured WPC that DWP will also be publishing a full impact assessment alongside the regulations and the government response to its previous consultation.

In addition to this, he confirmed that the regulations were on track to be laid in parliament in the “New Year”, having sent the letter to the WPC on 18 December, which is in line with recent timelines shared by the regulator.

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