The Pensions Regulator’s (TPR) new defined benefit (DB) funding code is now in effect for pension schemes with triennial actuarial valuation dates on or after 22 September 2024. The new code sets out guidance and expectations on how schemes should comply with funding and investment strategy (FIS) requirements.

TPR says the code “encourages good long-term planning and risk management behaviours” and includes guidance on how trustees can set funding plans in line with the support their sponsors can provide. It also shows how maturing schemes can move to a point of low dependency on their sponsor and gives advice on setting recovery plans in line with what is “reasonably affordable” for sponsors.

TPR’s Executive Director of Market Oversight, Neil Bull says he is delighted the new DB funding code has come into force. He says: “Together with the regulations, it focuses trustees’ minds on the right long-term objective for their scheme and provides clarity of our expectations,” adding: “It will improve our regulatory grip and should ensure savers get the benefits they expect.”

As part of what it describes as a “changing pensions landscape”, TPR says it will launch a live scheme-facing digital service in spring 2025. The service will enable easy submission of the statement of strategy and other valuation documents. TPR says it is working with several trustees in user research and to pilot the new scheme to ensure this service is right for all users.

MHM comment: The new code may not change materially how sponsors and trustees make their decisions on funding, investment and covenant, but it does change the documentation that needs to be put in place and scheme actuaries will be introducing their clients to some new jargon as part of the process.

With many DB pension schemes showing improved funding levels since 2022, they may be focussing on a relatively short timescale as they look at bulk annuity options, which should reduce the impact of the new code. However, not all schemes are in this position, some of which are still open to accrual and maybe even new entrants, so there will be a need to get to grips with the new requirements.

Get in Touch 

Whatever the position of your scheme, please contact our Trustee Director Steve Button to discuss how MHM can help manage your pension obligations to meet your short, medium or long-term goals.

Steve Button, MHM Trustee Services M: 07952 035538 E: steve.button@mhmtrustees.co.uk

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