DB scheme return deadline imminent

Deadline Imminent for 2024 Scheme Returns

The deadline is imminent for all eligible defined benefit (DB) and hybrid scheme returns to be made, with the countdown to the 31 March submission cut-off date made all the more critical after The Pensions Regulator (TPR) expanded the information it is collecting.

Wide-ranging additional questions have been posed by TPR requiring pension scheme trustees to provide detailed information about liquidity, leverage, fiduciary managers, investment consultancy providers, additional voluntary contribution providers and pensions dashboard primary contacts.

TPR says the information it receives on scheme liquidity and leverage, which came under close scrutiny after Bank of England intervention in the gilt market in 2022, will be used to assess whether its guidance is effective and to identify where stronger controls may be required.

To underline the importance of the additional questions, the regulator has also reminded trustees that, by law, they must provide a scheme return unless the scheme has only one member or another exemption applies. If a scheme return is not completed and submitted by the deadline, it will be a breach of the Pensions Act 2004 and trustees risk being fined.

As the industry sets about finalising its responses to TPR, MHM asked Fraser Weir of XPS Pensions Group what his views were on the additional questions applied to this year’s scheme returns that are relevant for schemes that have liability driven investments (LDI).

Fraser told us: “The year’s additional questions regarding liquidity and levels of collateral demonstrate the Pensions Regulator’s commitment to ensuring that trustees are monitoring the continued appropriateness of investments used to manage one of the biggest risks faced by pension schemes i.e. changes in interest rates and/or inflation.

“Whilst there is increased scrutiny on the use of LDI post the gilts crisis in the Autumn of 2022, these types of investments remain an essential part of investment strategies to protect funding levels for the long-term.

He continued: “The additional questions will apply to the vast majority of final salary pension schemes and trustees have had little time to prepare for completing the questions following a relatively short notification from the Pensions Regulator. Given the technicality of these questions and pressured timeframe for their completion, trustees should engage with their investment advisor to ensure accurate completion.

The questions reflect and align to the increased expectation from the Pensions Regulator that trustees have processes in place for monitoring the resilience of liability driven investments within their schemes. For trustees with LDI monitoring included as part of their regular investment monitoring, this information will be easier to obtain.”

For XPS Pensions Group: fraser.weir@xpsplc.com or call 0113 518 7429

About XPS Pensions Group

XPS Pensions Group is a leading independent pension consulting and administration business focussed on UK pension schemes. XPS combines expertise, insight and technology to address the needs of over 1,500 pension schemes and their sponsoring employers on an ongoing and project basis. We undertake pensions administration for over one million members and provide advisory services to schemes and corporate sponsors in respect of schemes of all sizes, including 81 with assets over £1bn.

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