Pensions - Articles - What do trustees want to see in the new funding code


TPR has shared some hints about the likely areas of focus in the upcoming DB funding code consultation. But will it address the issues trustees want it to?

 by Laura McLaren, Scheme Actuary, Hymans Robertson
  
 We asked over 130 trustees and independent trustees what they would find most useful from the new code. Here, we explore whether these align with the priorities of TPR, and how you can still influence the debate.
  
 Our research suggests:
  
 29% seek clarity on what ‘prudence’ and ‘affordable’ mean whilst 13% would value more clarity on when TPR will intervene.
 The new code looks set to address the current ambiguity, with TPR stating it will “provide a more straightforward, fast track route to demonstrating compliance”. Reassuringly, this doesn’t mean the Regulator is set to take a ‘one size fits all’ approach, but will instead provide some welcomed clarity around expectations for schemes based on factors such as maturity and covenant strength. This greater clarity will in turn help to inform those who are at greater risk of intervention, i.e. if TPR’s expectations aren’t being met.
  
 23% would like to see a requirement on sponsors to demonstrate they have sufficient resources to support pension risks.
 TPR have notably been taking a tougher stance on sponsors in recent times, particularly in relation to the fair treatment of pension schemes relative to shareholders. Affordability and covenant strength remain a key focus for TPR with a push for deficits to be “recovered as soon as reasonably affordable”.
  
 It’s yet unclear what the specific requirements will be around information-sharing from sponsors, however the direction of travel looks set to place more focus on quantifying the level of investment risk with greater transparency and justification around the sponsor’s ability, and willingness, to support this.
  
 10% would value making buy-out or self-sufficiency a statutory requirement.
 TPR have reaffirmed that setting a long-term objective will be at the heart of the revised code with TPR set to provide guidance on what it sees as a suitable LTO.
  
 How can you prepare?
 TPR is planning to undertake two formal consultations, in addition to informal conversations with trustees, employers and advisers.
  
 This gives everyone an opportunity to share their views and ideas on how DB pensions should be funded.
  
 While we await these proposals, there are many actions you could be taking now to prepare. Read our quick guide on what we already know, what to watch out for, and how you can get prepared.  
  

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