TPR to up DB asset allocation information requirements from 2023

The Pensions Regulator (TPR) has confirmed that it will press ahead with plans to ask trustees of defined benefit (DB) pension schemes for more information about how they allocate their assets from 2023.

In its response to its recent joint consultation with the Pension Protection Fund (PPF), the regulator explained that information will be requested at three levels of detail, depending on a scheme’s size.

Smaller schemes, those with assets of up to £30m, will be required to provide a basic level,
although this threshold to be kept under review, with the expectation that it will be reduced to £20m or less in future, in light of industry feedback received during the consultation.

More granular information will be requested for schemes with assets between £30m and £1.5bn, and schemes with assets of £1.5bn or more will be expected to provide information on the sensitivity of portfolios to investment stresses.

The additional data, gathered from annual scheme returns, is expected to assist TPR in assessing the investment risk of schemes and support the PPF in its levy calculation.

TPR noted that most of the 29 respondents to the joint consultation supported the proposals, particularly the need for schemes to provide more details on bonds, which make up around 70 per cent of DB pension scheme assets.

In light of this, the regulator has confirmed that scheme returns from 2023 will ask for bonds to be shown split into investment grade and sub-investment grade and, for some schemes, by duration, to capture more accurately the level of risk.

It is hoped that the better risk assessment will result in companies reducing the mismatch between assets and liabilities and to allow TPR to focus on schemes where the greatest risks to savers remain, in turn, reducing the bad outcomes amongst savers.

The regulator is now in the process of developing the necessary IT to enable the implementation of a new scheme return from 2023.

Commenting on the plans, TPR executive director of regulatory policy, David Fairs, said: “Protecting savers is our core priority and this additional data will give us a more detailed picture of how trustees are managing their members’ investments.

“It will give us an improved overview of DB funding whilst also flagging any potential concerns about a particular scheme’s approach to risk management.

“Recognising the burden on schemes as we emerge from the impact of the Covid-19 pandemic, we have decided not to ask trustees for this additional information until we issue our scheme returns in 2023.”

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