The Pensions Regulator is consulting on a proposed new regulatory approach to funding for defined benefit (DB) pension schemes. This represents the most fundamental shift in the scheme funding regime since it was introduced in 2005. For sponsoring employers and trustees of DB schemes keen to understand the impact on the future funding of their scheme, this is compulsory reading. But the true impact won’t become clear until the Regulator consults on the draft DB funding code of practice itself later in the year. A new regulatory approach: fast track and bespoke The Regulator is proposing that trustees should choose either a “fast track” or a “bespoke” approach to completing and submitting their scheme valuation: Fast track: The Regulator plans to set straightforward quantitative compliance guidelines, covering key aspects of funding and investment arrangements. These will include the funding target and timing to reach this; technical provisions (including discount rates and possibly other assumptions); recovery plan length and structure; investment risk; and future service contribution rates (where relevant). The plan is that these parameters will be regularly reviewed and updated. If trustees can demonstrate their valuation meets the guidelines, trustees will be able to follow the fast track approach and can expect minimal regulatory involvement. Bespoke: Trustees who cannot (or choose not to) follow the fast track guidelines will need to explain how and why they have differed from the fast track guidelines and how any additional risk is being managed. They will need to submit more supporting evidence and may receive greater regulatory scrutiny. But the Regulator has stressed that a bespoke approach is not a “bad” or second-best option and is equally compliant with the legislation. Trustees won’t be expected to maintain a previous approach (i.e. fast track or bespoke) at a future valuation. Overarching principles The Regulator is also consulting on a number of overarching principles that it believes should apply to all valuations, regardless of whether