Defined benefit pension scheme funding: TPR confirms defined benefit funding code to be published this summer and consults on statement of strategy

The Pensions Regulator (TPR) has now confirmed that the new Defined Benefit (DB) Funding Code of Practice (the Code) will be published this summer and take effect from 22 September 2024, aligning with the application of the Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2024 (the FIS Regulations) to DB schemes. Additionally, TPR has published a consultation seeking views from trustees and advisors on its approach to the statement of strategy.

The Code

The Code, which was first released in December 2022, is currently still in draft form. Speaking at the Pensions and Lifetime Savings Association (PLSA) Investment Conference 2024, Louise Davey, Interim Director of Policy, Analysis and Advice, assured representatives of DB schemes that the Code will be released with enough time for it to “be absorbed [by trustees and employers] and worked into plans”. 

The Code will take effect from 22 September, in line with the FIS Regulations, which come into force from 6 April 2024 and will start to apply to DB schemes whose actuarial valuations have an effective date on or after 22 September 2024. The House of Commons Delegated Legislation Committee considered the revised, draft FIS Regulations on 13 March 2024.

Statement of Strategy

From 22 September 2024, trustees of DB schemes will be required to complete a statement of strategy at the same time as they complete their first actuarial valuation with an effective date occurring on or after that date. The statement will set out their funding and investment strategy (FIS), a new and mandatory requirement under the FIS Regulations, and their approach to managing associated risks. 

TPR has proposed that the statement of strategy be in a standard form using a template prepared by TPR. TPR’s consultation, published on 5 March and open until 16 April 2024, seeks views to understand whether:

(i) the proposed approach raises any challenges or unintended consequences; 

(ii) the proposed template is clear and fit for purpose; and 

(iii) there are any issues with trustees providing the supplementary information proposed to be included  in the statement of strategy.

TPR has stressed that failure to submit the statement of strategy in a form as set out by TPR will amount to a breach of the law.

In our previous update on DB scheme funding we discuss the FIS related requirements in greater detail.

If you would like to discuss any issues relating to the new scheme funding regime, please get in touch with your usual Freshfields contact or any of the authors.