PLSA welcomes DB Funding Code and superfunds guidance

DB Funding Code

“TPR has taken a balanced approach. The final draft code provides greater clarity and flexibility in relation to the low dependency investment allocation (LDIA), particularly around the definition of ‘matching assets’ and the fact that the LDIA is a ‘notional’ investment allocation rather than an ‘actual’ investment allocation. There Is also greater flexibility around the testing of the high resilience of the LDIA.

“Also very important, the final draft code recognises the unique characteristics of open schemes. TPR has provided greater flexibility for trustees to take account of future accrual and new members for a longer period when determining the future maturity of the scheme. This prudently reduces the liabilities of open schemes compared to an equivalent closed scheme. TPR has also helpfully included a new open schemes module signposting the code guidance and expectations for open schemes. In addition, TPR appears to have recognised the benefits of greater flexibility for trustees in assessing the strength of the sponsoring employer according to specific circumstances. On the other hand, a separate section for multi-employer schemes has not been provided.

“It is most welcome that TPR has reflected on and updated its requirements given the vast improvement in scheme funding since the inception of the Code, though the expectation that schemes could use the just-laid Code in this autumn valuation cycle seems optimistic. A slower timetable would be more practical.”

Superfunds

“TPR has also published guidance for those setting up and running a DB superfund, which includes the regulator’s position on capital release and some additional detail around capital-backed arrangements (CBAs) and insolvency circumstances. We are pleased the regulator has listened closely to the industry regarding capital release, which can be undertaken up to twice a year, as long as specific triggers and safeguards are met.

“The inclusion of DB superfunds in the new Pension Schemes Bill should provide confidence to potential market participants. We have said for some time that, to ensure that the final DB superfund regime offers at least the same level of protection to scheme members as the DB funding regime, the Government should proceed quickly with finalising the DB superfunds legislation it consulted on back in 2020.

“The release of this latest DB superfund guidance is a strong indication that the regulator supports a wide range of suitable endgames for schemes, which is consistent with the PLSA’s view that trustees should have a full range of endgame options available to them.”

Mark Smith, Head of Media Relations
020 7601 1726 | [email protected]

Cali Sullivan, PR Manager
020 7601 1761 | [email protected]