Is AAF fit for today? What should Trustees be considering?
Is AAF fit for today? What should Trustees be considering? AAF 01/20 reports began appearing
Getting ready for your next valuation under the new Funding Code.
Some schemes are now carrying out their first valuations under the new Funding Code, so it may now be time to review whether your scheme and advisers are prepared.
The Valuation Process
We are finding that new valuations under the Funding Code generally need more planning and meetings at the outset. They will also require trustees, sponsor teams and advisers to work together and have a governance framework that drives cooperation.
As part of the valuation process, a new document – the Statement of Strategy – needs to be prepared and submitted to The Pensions Regulator. This is likely to require detailed input from the scheme actuary, investment consultant and possibly covenant adviser, so advance preparation is important here.
The new Funding Code is grounded in the need for schemes to work with sponsors to take a strategic, collaborative and joined-up approach towards scheme funding and investment. This is likely to increase governance budgets and sufficient time will need to be allowed for meetings and discussion.
While The Pensions Regulator expects most schemes to be able to adopt a ‘Fast Track’ approach working within its pre-set parameters, the decision whether to do so or to adopt a ‘Bespoke’ approach will be a key one for trustees.
After the valuation has been completed, trustees must make relevant submissions to The Pensions Regulator and also update members in a summary funding statement.
Preparation Is Key
The triennial valuation process with its 15-month limit is by now very well understood by all parties. In principle, a Fast Track valuation under the new Funding Code should take less time, but schemes should not under-estimate the prior work to agree the inputs into the Statement of Strategy and to agree (and document) their funding and investment strategies.
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