9 December 2005 - New scheme funding requirements for DB Schemes coming into force
New scheme funding regulations for defined benefit occupational pension schemes will replace the Minimum Funding Requirement (MFR) from 30 December 2005.
The new regulations will ensure that scheme members are kept updated about their scheme’s financial position and will also 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.
Stephen Timms said:
“These 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 in the event of any shortfalls.
“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 that 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.”
The new scheme funding provisions include new requirements for trustees to:
- prepare a statement of funding principles reflecting the particular circumstances of their scheme;
- obtain regular actuarial valuations and reports;
- put in place a recovery plan for addressing any funding shortfalls; and
- keep scheme members informed about their scheme’s funding position by issuing regular summary funding statements.
The Regulations will be accompanied by a code of practice for trustees on funding defined benefits, which will be available on the Pensions Regulator's website next week.
Notes for Editors
- The Scheme Funding Regulations supplement provisions in Part 3 of the Pensions Act 2004, and come into force on 30 December 2005.
- Under the legislation, trustees are 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.
- The Pension Regulator’s code of practice will be available to view at: http://www.thepensionsregulator.gov.uk. Codes of practice issued by the Pensions Regulator are not statements of the law. However they do have evidential value, meaning they will be taken into account by the Determinations Panel of the new Pensions Regulator, a court or tribunal where relevant.
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