The Pensions Regulator (TPR) has published guidance on how defined benefit (DB) trustees should set, implement and monitor their investment strategies.

The updated advice has a clear focus on risk management, stressing the importance of understanding risk levels and making sure they fit within a scheme’s risk appetite and integrated risk management plan.


The watchdog also emphasises the importance of effective governance, delegation and monitoring, and of long-term planning taking into account future cashflow and liquidity requirements.

The guidance includes examples of approaches and factors to consider when investing assets, and urges trustees to make sure the complexity of investments are appropriate for their scheme’s circumstances.

TPR head of investment consultancy Fred Berry said: “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.

“The investment strategy is one of the most important drivers of a scheme’s ability to meet the objective of paying the promised benefits as they fall due, and we expect trustees to set this in the context of their integrated risk management approach.”

Berry said it was important for trustees to set clear investment objectives for schemes and to identify how and when they should be achieved.

The 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 presses trustees to consider how their strategy is to be implemented, including considering operational risks, security of scheme assets, asset transitions and liquidity and collateral management.

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.

Barnett Waddingham partner Rod Goodyer welcomed this attention on monitoring.

“This is key to successful strategies rather than simply spending governance time largely on manager performance,” he said.

Redington head of DB pensions Dan Mikulskis said the regulator was right to focus on putting the most important information onto a dashboard.

“In our experience, better pensions scheme outcomes have been associated with a relentless focus on a small number of the most important scheme metrics,” he said. “These can be delivered really effectively in a dashboard, as TPR suggests in the guidance. The challenge is focusing on a small enough number of metrics to have a really firm grasp of them - TPR mention many metrics that could be included. Our challenge to scheme trustees would be to try and get everything they need to know about their scheme on a single page.”

TPR’s guidance can be found here