The guidance follows the common principles set out in TPR’s DC investment guidance together with some specific considerations relevant to defined benefit schemes.
“It is clear that the sustainability of pension funds over the long-term is inextricably connected with the sustainability of their investments. The new guidance goes a long way to bringing the connections between the two ever closer. It’s now up to all of us in the industry to help bring this about and we are ready for the challenge.”
The TPR stated that pension trustees are responsible for their scheme’s investment governance arrangements, including determining its investment strategy. The regulator indicated that a good investment strategy is likely to involve effective governance, delegation and monitoring; form part of an integrated risk management process; be consistent with the scheme’s objectives and any long-term plans; have an overall amount of risk consistent with risk appetite; involve risk-taking that is understood and balanced and allow for the scheme’s future cash flow and liquidity requirements.
The new guidance emphasises the importance of focused, timely monitoring and outlines how trustees may find it helpful to put together an investment monitoring dashboard. The TPR said this can provide an at-a-glance financial position of how a scheme is meeting its objectives and highlight potential risks and issues.
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