The Pension Regulator issues revised code of practice for defined benefit scheme funding

The Pensions Regulator (TPR) has published revisions to the Code of Practice 3, Funding Defined Benefits (“the Code”).  The revisions take into account TPR’s new statutory objective and reflects their developing approach and changing circumstances since they published the original Code in 2005. An integrated risk management approach, which relies heavily on trustees and employers collaboratively working, is the focus of the new Code. The aim is to ensure a balance between the needs of the scheme and the employer’s plans for the future sustainable growth of their business..

Adrian Kennett, Director of Dalriada, said:  “The new Code is welcome in that it codifies what has become best practice.  However, best practice could represent a considerable challenge for lay trustees.

Not only do lay trustees need to understand the interaction between funding, employer covenant and investment risks, the Code now requires them to balance funding with the need to minimise any adverse impact on an employer’s sustainable growth.

Lay trustees who hold senior roles in the business could face significant conflicts of interest.  Additionally all lay trustees will have to absorb considerable amounts of information to enable them to make informed, balanced decisions.”