A guide to the new funding code
16 May 2019
Consultation on a new more prescriptive DB code of practice on scheme funding will begin this year. With key objectives and principles flowing from last year’s DB White Paper1, it will implement measures which will “optimise” scheme funding in the wake of several high profile corporate failures. This will be accompanied by new and improved regulatory powers for The Pensions Regulator (TPR) to intervene when expectations are not met.
Download our quick guide to what we know, what to watch out for and how you can get prepared. The guide will include more information on:
- More direction, with minimum standards defining what’s “prudent” and “appropriate”.
- The requirement to set an appropriate long-term objective (LTO).
- A focus on managed risk taking.
- More regulatory scrutiny, oversight of corporate transactions and stronger penalties.
- Reporting to the Regulator in the form of a Chair’s Statement.
Trustees and sponsors will be watching closely for more on the exact form the new framework and powers will take. Further consultation is expected this year (to coincide with the Pensions Bill), with a second consultation on the draft code in early 2020 once there is more clarity on the intended primary and secondary legislative package.
Whilst many schemes will find that their current funding and investment plans map over quite neatly, all trustees and employers are, to some extent, going to have to work harder to demonstrate that a clear plan is in place and the risks they are running can be supported by the sponsoring business. We would encourage trustees and sponsors to start preparing now.
1 Protecting Defined Benefit Pension Schemes, March 2018