New funding regulations for defined benefit (DB) occupational pension schemes have been laid before Parliament, ready to come into force from December 30.
The new scheme funding regulations are scheduled to replace the Minimum Funding Requirement (MFR) by the end of the month. The regulations will ensure members are kept updated about the scheme’s financial position and will require trustees to have recovery plans in place to address any funding shortfalls, as well as obtain regular actuarial valuations and have a clear statement of funding principles.
Scheme Funding Regulations will supplement provisions in Part 3 of the Pensions Act 2004, and will be accompanied by a code of practice for trustees on funding defined benefits from the Pensions Regulator, which will also be laid before Parliament shortly.
Under the legislation, trustees are also required to obtain the scheme actuary's advice, and must generally obtain the employer's agreement, before making the key funding decisions affecting their scheme.
Stephen Timms, Minister for Pensions Reform, says the new regulations will ensure not only that members have important information about the financial health of their scheme, but that a clear recovery plan will be in place of any shortfalls.
He adds: “I believe this will help build confidence in pension funds. Key to our reforms has been to put information in the hands of scheme members, ensuring they know what is happening with their pension. These regulations underpin this.”
“The new provisions are a considerable improvement on the current rules and will allow pension schemes to develop an appropriate funding basis for their particular circumstances,” continues Timms.
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