Today sees a significant milestone in the trillion-pound defined benefit (DB) pensions market as The Pensions Regulator’s (TPR’s) new DB funding code is laid in parliament.
Following extensive industry consultation, the new DB funding code complements the change in regulations and sets out a framework protecting savers while giving flexibility to the market.
The new DB funding code sets out to trustees, sponsoring employers and advisers TPR’s guidance and expectations on how to comply with the Funding and Investment Strategy requirements. Once in force, it will replace the existing DB funding code, introduced in 2014, for valuations with effective dates on or after 22 September 2024.
The new DB funding code:
- encourages good long-term planning and risk management behaviours
- includes guidance on how trustees can set funding plans in line with the support their sponsors can provide and how maturing schemes can move to a point of low dependency on their sponsor
- gives guidance on setting recovery plans in line with what is reasonably affordable for their sponsor
TPR’s Executive Director of Market Oversight, Neil Bull said: “Today marks the final step in realising a new DB funding code that reflects the changing DB landscape. The DB funding code strikes the right balance between security and flexibility for scheme specific funding and investment approaches in the interests of members and employers.
“It will enhance the system as well as provide a framework to protect millions of savers. It is a significant step, and we would like to thank all those who have contributed their views during our extensive consultation. Together we have developed a DB funding code that will support trustees in effectively planning and managing the long-term funding of their scheme today, and in the future.
“Trustees, their advisers and sponsoring employers should read the new DB funding code to appraise themselves of what TPR sees as good practice.”
Minister for Pensions, Emma Reynolds said: “The code will help progress important work to protect savers and pensioners. I’m grateful for the work across the pensions industry to help make this happen.
“Millions of people rely on defined benefit schemes and the new regime will help ensure they are protected for the long-term, while retaining pension schemes that make for more productive investment, boosting economic growth.”
While many schemes are currently well funded, the DB funding code outlines principles and requirements to support schemes no matter what their financial positions in the months and years ahead.
There are around 5,000 private sector DB schemes holding, as at 31 March 2023, £1.3 trillion worth of assets. But seven in ten are closed to future accrual and just 4% remain open to new members. The revised DB funding code has necessary flexibilities to be relevant and supportive of all DB schemes, including open ones.
The DB regulations, that align with the DB Funding Code, came into force in April this year and apply to valuations with effective dates on or after 22 September 2024.
TPR recognises there will be a gap between when the requirements of the Funding and Investment Strategy Regulations start applying and the new DB funding code is in force. Schemes with valuation dates in this period can use the new DB funding code as the base for their approach. TPR will be communicating with affected schemes and will take a reasonable regulatory approach to them.
Also published today is TPR’s response to its consultations on the new DB funding code and its regulatory approach, including Fast Track and Bespoke valuation submissions, including final fast track parameters.
Notes for editors
- Papers presented to parliament by external bodies are presented formally and described as being laid upon the Table of the House. Papers may be laid because the bodies are required to do so by law or by a decision of Parliament, or because the government has decided, or previously committed, to provide information to parliament. A draft code of practice must be laid for a period of 40 days commencing on the date of laying and ignoring any period during which parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days. This is the current status of the new DB funding code.
- The Funding and Investment Strategy refers to the funding of defined benefit schemes requirements of the Pension Schemes Act 2021, the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 ('the Regulations')
- TPR is the regulator of workplace trust-based pension schemes in the UK. Our statutory objectives are to:
- protect members’ benefits 
- reduce the risk of calls on the Pension Protection Fund
- promote, and to improve understanding of, the good administration of work-based pension schemes
- maximise employer compliance with automatic enrolment duties
- minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only)
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