01 December 2025
10 min
In 2025, many defined benefit (DB) pension schemes faced a landmark moment: their first actuarial valuations under The Pensions Regulator’s (TPR’s) new funding code. Now, a year on, we’re starting to see how schemes are responding to the biggest shake-up in funding rules for over 20 years.
Each scheme faces its own challenges in first-time adoption. For many, strong funding positions have eased the transition, allowing them to retain existing strategies while ticking the compliance boxes. For others, the code has triggered more significant changes, requiring a rethink of long-term plans. Across the board, though, one thing is clear: the new regime demands more rigour, more evidence, and more collaboration. The good news? With early planning and the right mindset, schemes can meet these expectations and stay focused on their strategic goals.
In this article, we unpack five key lessons from year one and offer practical tips to help schemes prepare for future valuations.
A central pillar of the new funding code is the requirement for every scheme to set a long-term funding and investment strategy, anchored by a clearly defined endgame objective. Whether that’s buy-out, run-on, consolidation, or another path, it now shapes all funding and investment decisions.
The landscape in 2025 has shifted rapidly, and schemes now have more viable endgame options. Trustees and sponsors should reassess their long-term intentions and set clear milestones that reflect their chosen direction. Some schemes may want to keep their plans flexible, while others may be ready to document a more settled view. Early engagement is key: opening discussions with sponsors and advisers helps clarify strategy, supports the preparation of the Statement of Strategy, and ensures decisions are clearly justified. For schemes considering run-on or alternative paths, it’s important to avoid rigid frameworks that could limit future choices. Ultimately, aligning valuation decisions with a thoughtful and adaptable endgame strategy will position schemes to navigate future developments with confidence.
Read our publication 'From vision to valuation: why your endgame sets the course.'
ACTION: Schedule a workshop to review long-term goals upfront. The valuation is a good time to check alignment with both regulatory expectations and market developments.
Under the new funding regime, scheme maturity has become a central consideration. Trustees must design their funding and investment plans with a clear view of how far their scheme is from reaching ‘significant maturity’ – the point where low-dependency funding is expected. While many schemes are currently well-funded or in surplus on a low-dependency basis and have time to reach their target, those nearing significant maturity face tighter constraints. Trustees can also choose to bring targets forward – for example, to address specific concerns about employer covenant, align with endgame plans, or to simplify compliance. An earlier target date can create headroom above minimum requirements and help manage future volatility.
Assumption setting now carries more weight, especially where cash needs are finely balanced. Trustees must align assumptions with actual experience. For example, cash commutation at retirement should be supported by data. Options like retirement timing, once seen as neutral, can now affect duration. Updating assumptions like commutation or longevity may reduce liabilities but shorten duration, which affects Fast Track compliance and long-term planning. Open schemes must also justify assumptions on future accrual and new members.
ACTION: Estimate scheme maturity early in the valuation process. It will shape timeframes and the strength of funding needed. Use robust, evidence-based assumptions to make sure strategies are fit for purpose.
One of the more unexpected challenges under the new code has been the need to reserve for future expenses. Even well-funded schemes find this can create deficits and is likely to be a key discussion point with employers.
Early planning and realistic projections are essential, especially for smaller or more mature schemes where expenses are a larger share of assets. Schemes may want to revisit the rules on expense payment, as these affect whether a reserve is needed and how large it should be. Will reserves be built into both technical provisions and low dependency targets? Will trustees include expenses before significant maturity? Trustees should avoid anchoring assumptions solely to recent experience – especially if one-off projects have skewed costs. Think about how expenses might change over time.
The approach to expense reserves needs to closely reflect the scheme’s documented long-term strategy and take account of inflation, scheme maturity, and expected wind-down in projections.
ACTION: Ultimately, the size and nature of the reserve can vary significantly depending on the approach. Use appropriate assumptions to make sure reserves are not excessive or disproportionate, especially if significant maturity is still some way off or endgame plans are flexible. Engage employers early about expense reserves to manage expectations and avoid surprises.
Trustees, sponsors and advisers need to work together from the start to integrate funding, covenant and investments. The new regime encourages a more joined-up process. Covenant reliability and longevity now play a bigger role in journey planning, especially for schemes that rely heavily on employer support. These schemes must gather detailed evidence to show covenant strength – which can be hard where covenant is unusual or data (such as business forecasts) is limited. Early engagement helps avoid unnecessary constraints on strategy. Legal advice may also be needed, especially where contingent support or reliance on external entities is involved.
Bringing together views on scheme maturity, funding estimates, Fast Track positioning and covenant reliance early will help guide key decisions. Identifying if a scheme is ‘low-risk’ – in surplus on a low-dependency basis, even after stress testing – can simplify planning and reduce unnecessary effort. For more complex or higher-risk schemes, TPR will expect a deeper level of analysis and explanation, making early coordination and thorough preparation essential for a smooth and effective valuation.
ACTION: Early collaboration and information sharing will support planning and proportionality. Preparing the new Statement of Strategy is also best achieved with coordinated input from multiple advisers. Trustees and sponsors need to jointly agree aspects of the long-term strategy that may not have been discussed before. Open dialogue early to understand and test views.
TPR offers two routes for compliance: Fast Track and Bespoke. While TPR anticipates that around 80% of schemes will be able to adopt the Fast Track route at no cost – a more streamlined, proportionate compliance option particularly suited to smaller schemes – this is not mandatory. In practice, schemes have taken different approaches. Some have opted for Fast Track, while others have chosen Bespoke to better reflect their needs. Many trustee boards already have well-developed long-term plans, and don’t want to abandon them unnecessarily.
Some worry that choosing Bespoke could mean more scrutiny, but many schemes can justify this route if Fast Track parameters don’t quite fit. The extra compliance is usually manageable.
ACTION: Assess how current plans compare to Fast Track benchmarks. This can highlight areas of regulatory focus. If a sound strategy falls outside Fast Track, this can be managed through clear disclosures. Compliance should follow strategy – not drive it.
The first year of valuations under the new funding code has shown how theory translates into practice. Schemes are adapting to the new requirements, and valuable lessons are emerging. As more schemes go through valuations under the new code, we’ll start to see how TPR responds to submissions. For now, some uncertainty remains.
The regime offers flexibility, but it also demands more rigour, collaboration and forward planning. Trustees and sponsors must work together to build a strategy that’s not just compliant, but sustainable.
Start early. The new code and statement of strategy introduce additional steps and documentation. Planning ahead is key. Schemes that built this into their valuation timetable were better placed to manage the extra workload.
Focus on the big picture. Good advice helps schemes stay proportionate. It’s easy to get lost in the detail, but the code is ultimately about long-term security for members. Identifying technical points around assumptions and expense reserves early should help avoid unhelpful distractions later. Understanding covenant reliance also helps shape analysis and risk assessment. Keep clear on strategic goals to support your decision-making and proportionality.
Collaboration matters. The code expects integrated thinking across covenant, investment and funding. Schemes that brought advisers together early found it easier to align assumptions and avoid duplication.
Evidence is essential. Whether going Fast Track or Bespoke, trustees should be able to justify their decisions. That means documenting assumptions, covenant assessments and investment risks clearly and consistently. Additional disclosures for Bespoke can be managed where Fast Track isn’t the best fit.
Following these early lessons will help you get the most out of your valuation.
To find out more about the requirements of the new funding code, and access some additional resources, visit our funding code hub. We'll continue to share insights and support trustees as they adapt to the new landscape.
If you have any questions or would like to discuss further, just get in touch.
This blog is based upon our understanding of events as at the date of publication. It is a general summary of topical matters and should not be regarded as financial advice. It should not be considered a substitute for professional advice on specific circumstances and objectives. Where this blog refers to legal matters please note that Hymans Robertson LLP is not qualified to provide legal opinion and therefore you may wish to obtain independent legal advice to consider any relevant law and/or regulation. Please read our Terms of Use.
We pride ourselves on being thought leaders and are constantly discussing the many issues facing and shaping our industry. Sign up to find our current thinking on topical issues.
Opens in new window Subscribe
