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Statement of strategy

This code of practice applies to activities related to valuations with effective dates on and after 22 September 2024. For activities related to valuations with effective dates before 22 September 2024, refer to the 2014 DB funding code (PDF, 401kb, 51 pages).

  1. Trustees must prepare a written statement of strategy made up of two parts.
    1. Part 1, which records the funding and investment strategy.
    2. Part 2, which records supplementary matters, including how well the funding and investment strategy is being implemented, the main risks to the strategy and how they are being managed, and reflections on significant decisions and lessons learnt, and various other matters.
  2. Part 1 of the statement must be prepared as soon as reasonably practicable following any determination or revision of the scheme’s funding and investment strategy. Part 2 of the statement must be reviewed and if necessary revised as soon as reasonably practicable after a review of the funding and investment strategy, whether or not it is revised.
  3. The statement of strategy must also be submitted to us. In most cases it must be submitted to us as soon as reasonably practicable after the funding and investment strategy has been prepared or revised. We would normally expect this be within 10 working days. Trustees may use their judgment and apply 'reasonably practicable' to their own circumstances, though we would encourage them to record their reasons if a longer period can be justified. Further information about the statement of strategy and other key funding documents are set out in reporting and inter-valuation requirements by documentation type. Different timescales apply where the revision is a consequence of our giving directions for the statement of strategy or technical provisions to be revised.
  4. A trust scheme’s statement of strategy must be signed on behalf of the trustees by the chair of trustees. If the scheme does not have a chair, the trustees must appoint one. A chair must be:
    1. an individual who is a trustee of the scheme
    2. a professional trustee body which is the trustee of the scheme, or
    3. where a company which is not a professional trustee body is a trustee of the scheme, an individual who is a director of the scheme or a professional trustee body which is a director of that company

Code principles for approaching the statement of strategy

Form of statement of strategy

  1. The statement of strategy must be submitted in a form set out by us. We also have discretion over the level of detail required on certain supplementary matters. Trustees must, therefore, follow our guidance on how to prepare and submit the statement of strategy, including using any templates we may provide.

Proportionality

  1. Information collected in Part 1 of the statement of strategy will be required regardless of the scheme’s circumstances. We have discretion over the level of detail required for much of the information, evidence and explanations required in Part 2 of the statement. The amount of detail we require will depend on the scheme’s circumstances and the level and complexity of the risk being taken.
  2. Where trustees are asked to provide explanations or commentary, we expect trustees to take a proportionate approach, taking account of the:
    1. size of the scheme (in absolute terms and relative to the size of the sponsoring employer)
    2. maturity and funding level of the scheme
    3. level and complexity of the funding and investment risk being taken, and the amount of reliance being placed on the employer covenant
  3. The greater the complexity or risk, the greater the level of detail and explanation we will expect to see.

Working collaboratively

  1. Trustees will need information from the employer if they are to comply with the scheme funding requirements, and complete all the supplementary matters in Part 2 of the statement of strategy.
  2. We expect trustees and employers to work together in an open and transparent manner. Trustees should engage with the employer early and often, and obtain relevant information from them at an early stage. Employers must provide trustees with information which the trustees and/or their professional advisers reasonably require to perform their respective duties. This includes the duty to prepare the statement of strategy.
  3. Trustees should not be refused information they are otherwise entitled to because of concerns over stock exchange requirements or other confidentiality issues. The statement of strategy is not a public document. It should be possible to address potential employer concerns, for example by trustees entering into a confidentiality agreement.
  4. As we expect that most of the information contained in the statement of strategy will be ‘restricted information’ as defined in section 82 of the Pensions Act 20041, we will treat that information as confidential and not disclose it to any other person unless specifically permitted to do so in the limited circumstances provided for under the legislation.
  5. Trustees must obtain the agreement of the sponsoring employer to the funding and investment strategy set out in Part 1 of the statement of strategy, unless the rates of contributions payable to the scheme by the employer are determined by the trustees or managers without the agreement of the employer, and no person other than the trustees is permitted to reduce those rates or to suspend payment of contributions. In that case, the trustees are required to consult the sponsoring employer (or their representative) on the funding and investment strategy, not obtain agreement. Employers in multi-employer schemes may choose to appoint a representative for this purpose, or to waive their right to agree or be consulted.
  6. Trustees must consult with the employer in relation to Part 2 of the statement of strategy. We recognise that employers in multi-employer schemes may also choose to waive this requirement or consult via a representative.

Part 1: Funding and investment strategy

  1. Trustees must record their funding and investment strategy in Part 1 of the statement of strategy, detailing their plan for delivering benefits over the long-term.
  2. As set out above, the funding and investment strategy must be agreed with the employer, apart from in the limited circumstances where the employer must be consulted. We expect confirmation of this agreement or consultation in Part 1 of the statement of strategy.
  3. In the funding and investment strategy, trustees must provide the following information.
    1. The way in which they intend pensions and other benefits under the scheme to be provided over the long term. This is the long term objective and can be changed over time.
    2. The expected maturity of the scheme at the relevant date, where the relevant date is in the future. The expected maturity must be expressed as the duration of liabilities calculated on a low dependency funding basis. The form of the statement of strategy will require trustees to provide their chosen relevant date.
    3. The current funding level of the scheme on a low dependency funding basis, as shown in the actuarial valuation to which the funding and investment strategy relates.
    4. The funding level the trustees intend to achieve by the relevant date, calculated on a low dependency funding basis. The scheme must be at least fully funded on a low dependency basis by the relevant date, but the trustees can target a higher level of funding.
    5. Information about discount rates and other assumptions used to calculate the scheme’s liabilities – in particular how discount rates will change over time. For a scheme that has not yet reached the relevant date, this will illustrate how the scheme’s funding assumptions will evolve over the journey plan to the low dependency funding basis at the relevant date. Where a scheme’s relevant date is in the past, this will illustrate how the funding assumptions will continue to comply with the low dependency principle as the scheme continues to mature.
    6. The proportion of scheme assets the trustees intend to allocate to different categories of investments at the relevant date. We expect the proposed investments to reflect the low dependency investment allocation, to comply with the objective that assets of at least the minimum funding level should be invested in this way after the relevant date. As surplus assets are not subject to the same objective, if trustees plan to invest surplus assets differently to the low dependency investment allocation at the relevant date, we also ask the trustees to show how they intend to invest these assets separately.

Part 2: Supplementary matters

  1. Trustees must record supplementary matters in Part 2 of the statement of strategy. Trustees must consult with the employer when preparing or revising Part 2 and include confirmation of this in the statement of strategy, together with any comments that the employer has asked to be included.
  2. In Part 2 of the statement of strategy, trustees must provide the following information.
    1. The extent to which, in their opinion, the funding and investment strategy is being successfully implemented. Trustees must set out any areas where the funding and investment strategy is not being successfully implemented, and any steps they propose to take to address them.
    2. An assessment of the main risks to implementing the funding and investment strategy. We expect trustees to outline these risks, how they are being monitored and explain how they intend to mitigate them.
    3. Reflections on any significant past decisions taken by the trustees relevant to the funding and investment strategy, including lessons learned and how those lessons have impacted other decisions, or are being taken into account. Trustees should focus on matters that have materially affected their thinking and/or approach to funding or governance.
  3. Trustees must also be prepared to record the following additional matters, but the level of detail provided will be determined by us. Generally, we will expect a greater level of detail where there is greater complexity, or a higher level of risk is being taken. In some instances, we may determine that no information is required.
    1. A summary of the actuarial valuation to which the funding and investment strategy relates, and any related recovery plan.
    2. The actuary’s estimate of the maturity of the scheme at the effective date of that valuation.
    3. For a scheme which has assumed an allowance for new entrants/and or future accrual, a calculation of the duration of liabilities and future accrual based on those assumptions and confirmation of how long future accrual has been allowed for.
    4. Where the scheme’s relevant date is in the future, trustees must provide evidence of how maturity is expected to change over time.
    5. An assessment of the employer covenant outlining the financial ability of the employer to support the scheme. The employer covenant module of this code provides more details on how to assess the covenant. We expect the description of how the employer covenant supports risk to be proportionate to the level of risk being taken and to reference the employer’s cash flows, prospects and contingent asset support. However, the level of detail required may differ. Trustees must also be prepared to provide their assessment of the employer’s reliability period and covenant longevity to support their assessment of how long the employer covenant can reasonably be relied upon.
    6. The current level of risk in relation to the investment of the assets of the scheme. As a minimum, we expect the trustees to provide a breakdown of the current notional investment allocation.
    7. An explanation of how the trustees intend to comply (or, if the relevant date is in the past, do comply in the actuarial valuation to which the funding and investment strategy relates) with the objective to have a low dependency investment allocation (LDIA) on or after the relevant date.
    8. Where the relevant date is in the future, our expectation is that trustees will set out an investment journey plan for how their notional investment allocation will change over time to reach an LDIA by the relevant date.
    9. Where the relevant date is in the past, we expect trustees to confirm that the calculation of TPs in the actuarial valuation to which the funding and investment strategy relates assumes a notional investment allocation in line with the LDIA.
    10. An explanation of how investments comply with the liquidity principle.
    11. An explanation of the extent to which the funding and investment strategy is appropriate, or remains appropriate, including why the trustees have reached that conclusion.

Legal references

1 Article 77 of The Pensions (Northern Ireland) Order 2005

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Statement of strategy information

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