This week’s insight covers TPR’s first annual funding statement under the new funding regime, TPR’s market volatility report following recent market turbulence, the roll-out of multi-employer CDC legislation this autumn and the Government’s response to the WPC’s DB schemes report.
The Pensions Regulator (TPR) round-up
AFS 2025 – the first AFS under the new funding and investment regime
TPR published its first Annual Funding Statement 2025 under the new funding and investment regime on 29 April 2025. Although it is primarily directed at schemes producing valuations with effective dates between 22 September 2024 and 21 September 2025, it is relevant to all defined benefit (DB) pension schemes as it covers important points from the new DB funding code of practice and TPR’s updated December 2024 employer covenant guidance. You can read more about the statement in our insight here.
Market oversight volatility report
On 2 May 2025, TPR published a market volatility oversight report setting out best practice for schemes in the advent of recent market volatility including the trade and geopolitical pressures caused by US trade tariffs.
- DB schemes – impact
- Volatility has impacted both return-seeking and liability matching assets. The funding impact will depend on asset allocation and hedging.
- Most DB schemes have strong technical provision funding and so should be able to ‘absorb short-term shocks’.
- Nevertheless, trustees should remain vigilant to immediate and emerging risks, especially where employer covenant is uncertain.
- DB schemes – best practice
- Liquidity and cashflow: ensure short-term liquidity and cashflow needs are met, monitor liquidity buffers, and be prepared to provide additional liquidity if necessary. React appropriately to any delays to deficit repair contributions.
- Investment strategy and risk management: make sure the investment strategy remains appropriate, engage with advisers to see if rebalancing arrangements, diversification and risk levels, pre-agreed changes, resilience to tail risks and investment strategy and market weightings need reviewing.
- Governance and operational resilience: governance structures should be flexible enough to be able to deal with short-term market changes, especially because it is likely that the volatility will be prolonged.
- Covenant and employer: assess how the employer might be impacted.
- Opportunities and funding level changes: prepare to benefit from increased funding levels, evaluate de-risking or risk transfer policies and consider how surplus release changes might impact these policies.
- DC schemes – impact
- News reports may well be concerning for members – trustees should take this into account when communicating with members.
- Those planning transition activity should monitor this appropriately.
- DC schemes – best practice
- Member communication: effective communication about market conditions in times of economic uncertainty is key as members are understandably concerned about the impact on their fund levels and some may consider switching funds crystallising losses or stop contributions. Members should be encouraged to obtain advice before switching funds and reminded about the importance of scam awareness.
- Investment and risk management: monitor risks, review investment strategy with advisers including rebalancing arrangements, diversification and risk levels and appropriateness of planned transition activity.
- Strategic oversight: identify value-enhancing investment opportunities and evolve investment strategies as appropriate.
Action: Trustees should consider whether they need to take any further action in response to recent market changes taking into account TPR’s report and liaising with advisers and the employer as necessary.