Open DB schemes
Open DB schemes are different to other types of DB arrangements. This is the case whether a scheme is open to new members, open to future accrual or has benefits which retain a link to final salary.
As the number of open DB schemes decreases, the trend towards closure and wind-up continues. With the industry focusing more on schemes reaching their “end game”, this could lead to open DB schemes being overlooked. However, as the leading specialist firm in the UK for the pensions industry, we act for a significant number of high profile large open DB schemes. That means we have an in-depth understanding of the particular issues that arise for these schemes and are well placed to advise our clients on how best to navigate and address them.
One area of particular focus for open DB schemes will be the new scheme funding regime. We are expecting draft regulations which will outline the detail of the new requirements for DB trustees to determine, with the agreement of sponsoring employers, a strategy for ensuring that scheme benefits can be provided over the long term. TPR’s consultation on its new DB funding code of practice is expected to follow in “late summer 2022”.
TPR originally consulted on its approach to the new DB funding code back in 2020. However, there were concerns that its approach could lead to the closure of more DB schemes (see our consultation response). We will be keeping a close eye on both the draft regulations and code of practice to see how they will affect our clients with open DB schemes.
How we can help
We can provide tailored support to trustees and sponsoring employers of open DB schemes, including regarding:
- scheme funding and valuations
- investment strategy
- benefit design
- regulatory issues
- governance and risk management