TPR’s new DB funding code expected in September 2023

In the document published on June 13, the regulator explained that the delay in the new funding rules, and in its second consultation on the matter, has allowed it to take the time it needs “to develop the right shape for our DB funding code”, while wanting to take the “opportunity to learn from the [Department for Work and Pensions’] consultation on draft funding and investment regulations”.

The new DB funding code proposes a twin-track approach to valuations, under which schemes will be able to choose between a bespoke route or a more prescriptive fast-track option. 

Pensions Expert reported in December that the second consultation had been delayed until late summer 2022.

This is far from ideal as schemes continue to have to prepare funding valuations in line with the current regime, knowing that new rules are coming down the track

Shayala McRae, LCP

“On the basis that the DWP consults on its draft funding and investment regulations in spring 2022, we are planning to launch our second consultation in the autumn of 2022, with our new code becoming operational from September 2023,” the regulator said, though it cautioned that "these timings remain subject to change”.

TPR has reiterated that “resulting changes from the new code will be forward-looking, which means that schemes with valuation effective dates on or after the code’s commencement date will be affected”.

However, “it is possible that we may undertake a [regulatory initiative] ahead of the code becoming operational, with the potential for a focus on scheme management of risk and resulting covenant strength”, the plan explained.

LCP principal Shayala McRae said: “This is far from ideal as schemes continue to have to prepare funding valuations in line with the current regime, knowing that new rules are coming down the track.”

The strategic priorities

TPR’s intent to develop and consult on the new DB funding code is part of a list of 19 individual “saver outcomes” included in its corporate plan, against which the regulator will measure its own performance. 

The outcomes also cover defined contribution and DB regulation, the authorisation and supervision regime for collective defined contribution schemes, measures to tackle pension scams, and a “holistic value for money framework”.

The new corporate plan makes specific acknowledgement of current challenges facing the pensions landscape, including inflation, falling incomes, the after-effects of Covid-19 and the war in Ukraine, all of which the regulator said it will continue to monitor, not least because straitened economic conditions can leave people more susceptible to pension scams and schemes themselves vulnerable to disadvantageous restructures by employers.

The plan lays out TPR’s priorities for the next three years, including the implementation of its new powers under the Pension Schemes Act, which the plan lists as an ongoing priority across both 2022 and 2023.

Short-term priorities — those the regulator will focus on in the next two years — include a renewed focus on cyber security and measures to combat scams, an authorisation assessment for CDC schemes to be in place by August 2022, and continued and evolving regulation of master trusts in particular and auto-enrolment generally.

The watchdog has also committed itself to an education campaign designed to get schemes and trustees ready for pensions dashboards integration. This will include “guidance on our website, industry engagement, and one-to-one communications to each scheme at least 12 months ahead of their connection deadline”, the corporate plan explained.

TPR will work with the Pensions Dashboards Programme and the Financial Conduct Authority “to monitor the progress industry is making in preparing for the new duties, and we will work collaboratively with industry to resolve any challenges”.

“We will consult on our compliance and enforcement policy, and develop our internal systems and processes, ready for regulating compliance from June 2023,” it said.

TPR ‘well placed to protect savers’

TPR chief executive Charles Counsell said: “Our latest corporate plan shows we are well placed to protect savers as the pensions landscape continues to evolve. We can’t predict how the challenges of Covid-19, the conflict in Ukraine, the cost of living and climate change will play out in the long term, but it is vital that we and industry are prepared for heightened volatility.

“In these challenging times, we are committed to helping employers comply with their pension duties and to protect the security of their workplace schemes, and are ready to act if they don’t. We continue to support trustees in the effective running of schemes in savers’ best interests.”

Counsell reiterated the regulator’s commitment to “work with out partners to meet the ambitious pensions dashboards legislative timetable, and will embrace new scheme models while overseeing the regulation of superfunds and CDC schemes. We will be assessing CDC schemes for authorisation from August”.

TPR chair Sarah Smart added that the regulator would continue to focus on increasing diversity and inclusivity in pensions, especially on trustee boards.

“We will publish an action plan setting out how we plan to support the development of more diverse and inclusive boards of trustees and managers,” she said.

“We will also be working with government and industry to improve equalities in saving. To this end we support the 2017 automatic enrolment review proposals, which aim to open workplace pension saving to more people.”