As 2021 recedes into the rear view mirror, and we motor on into 2022, sponsors of Defined Benefit (DB) schemes need to engage with their Trustees to map out a route for the pension scheme which is aligned with the wider business’ strategy.   

With the Pensions Schemes Act 2021 bringing in the new requirement for sponsors and Trustees to agree long-term funding and investment strategy, sponsors have a greater part to play in setting the end destination and speed of the journey for their DB scheme.  

Risks and opportunities 

There is the risk that sponsors taking a back seat now may find the Trustees setting a strategy resulting in higher cash funding requirements as well as other ‘bumps in the road’ e.g. unhelpful accounting impacts of trustee-led initiatives.  

New tougher powers for The Pensions Regulator (TPR), means that there is also a need for sponsors to be aware of where these powers could lead to roadblocks for their business strategy without proactive management of the new regulatory risks. 

But there are clear opportunities alongside the risks – sponsors being proactive and engaging with the Trustees early can help set the pensions strategy and ensure alignment with the wider corporate strategy, and there is the potential in most cases for real win-win outcomes. 

How LCP can help 

For many of our corporate clients we have already carried out a Pensions Strategy Review to help them address key questions in relation to their DB scheme, to plan the route to a longer-term funding and investment target which works for all parties, and to prioritise any actions to manage the impact on the business. This gives the Company board confidence that pension risk is being appropriately managed and opportunities in relation to the scheme are not missed. 

We work with our clients to build and document a plan which can be discussed and shared with wider stakeholders in the business (eg the Company board), and with the pension scheme trustees. Monitoring progress against this plan is then key, as is having a clear framework for how and when to respond to future opportunities and risks. 

You can find out more about our Pensions Strategy Review for DB sponsors by clicking the button below.