UK Pensions – A sea change for scheme funding

A new funding regime for defined benefit occupational pension schemes is a step closer following the publication of draft regulations, which set out the details underpinning the framework introduced by the Pension Schemes Act 2021. The regulations are not expected to come into force until 2023, but employers and trustees will be keen to understand the likely impact on the future funding of their scheme.

The Government consultation says that, although most employers and trustees use the flexibilities in the current regime in a reasonable way, good practice is not universal. The stated aim of the new regime is therefore “to ensure those outliers now follow best practice”. While the Government is keen to emphasise that the new regime is not “one size fits all”, it does seem likely that the scheme specific funding regime introduced in 2005 will be less “scheme specific” and more prescriptive once the regulations come into force.