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U.K.’s Pensions Regulator outlines guidance for corporate pension plan trustees

The Pensions Regulator has published investment guidance for trustees of defined benefit funds, outlining factors and approaches related to investment governance, implementation and monitoring.

The U.K. regulator said Thursday its publication was part of a strategy to produce simpler guidance for corporate pension funds. It follows work by TPR to set out defined contribution investment guidance.

The guidance includes examples of approaches and factors that trustees should consider when investing DB assets. The regulator said in a statement accompanying the guidance that it expects trustees to have “suitably documented investment arrangements that are appropriate for their scheme's circumstances, including their level of complexity.”

The regulator said 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 fund's objectives and long-term plans; and have an overall amount of risk consistent with risk appetite. Good strategies will also involve a measure of risk taking that is understood and balanced, and will allow for future cash flow and liquidity needs.

The timely monitoring of strategies is also emphasized, with TPR outlining how trustees may find it useful to put together an “investment monitoring dashboard.” The idea is to provide an at-a-glance financial position of how the fund is meeting its objectives, and to highlight any potential risks and issues.

“Good investment governance is essential to all pension schemes, indeed to any institutional investor, and we expect them all to adhere to those common principles,” said Fred Berry, TPR's head of investment consultancy, in the statement. "It's important to set clear investment objectives for your scheme and to identify how and when they should be achieved. Our guidance states that trustees should focus on areas that have the most impact for meeting their scheme's objectives, and identify the necessary skills for the board of trustees of their scheme. It also provides some practical guidance on how to get the best from their advisers."

The guidance is available on TPR's website.