A proportionate, strategic and well-planned approach is key to navigating the new DB funding regime – LCP

Eighteen months into the new DB funding regime, LCP is urging trustees and sponsors to take a proportionate, strategic, and well‑planned approach to their upcoming valuations.

In a new guide, LCP sets out key practical steps trustees should follow to keep valuations efficient, compliant and focused on long‑term outcomes.

LCP’s key recommendations include:

• Lead with strategy, not box-ticking: The new regime retains meaningful flexibility, so schemes can prioritise strategic objectives first and then use the flexibilities to meet compliance requirements.
• Plan early and plan well: Efficient valuations under the new regime rely on robust project planning. Trustees and sponsors should ensure that they have the right information at the right time and that advisers are coordinating effectively as integrated risk management now plays a bigger role. Joint training sessions – with both trustees and sponsors – are a great way to start a valuation process collaboratively.
• Prioritise covenant assessment at an early stage: New covenant concepts and metrics play a much more central role in the new regime. Early covenant input is essential, particularly given the requirements to submit more covenant information than ever before to TPR.
• Consider the importance of the low‑dependency funding basis: With legislation expected to allow surplus sharing above this benchmark, the low‑dependency funding basis set as part of a valuation could become a pivotal reference point. Trustees and sponsors should think carefully about how this basis is defined and communicated, as many will not have considered its significance in a surplus‑sharing context before.
• Recognise that some schemes will require more bespoke consideration: Applying the new regime may be more complex for certain schemes, such as those sponsored by charities or not‑for‑profit organisations, or for open schemes where additional judgement is needed. TPR has shown willingness to adopt a flexible approach in such cases, but trustees and sponsors must still be ready to explain how long‑term risks will be managed, especially if circumstances change.
• Keep the process proportionate: For well‑funded schemes, the new regime is likely to be more about formal compliance than substantive change. Trustees and sponsors should ensure advisers take a pragmatic approach, avoiding unnecessary complexity. While some schemes will require deeper analysis, most valuations should be able to proceed smoothly with a focus on proportionality.