The Pensions Regulator has confirmed that the DB Funding Code of Practice will now be published in April 2024.

Back in December 2022, the Pensions Regulator (TPR) published the latest draft of its revised Defined Benefit Funding Code of Practice (Code). At the time, TPR intended to have the Code finalised and in force by October 2023. However, TPR has now confirmed that the Code will be delayed until April 2024.

Background

Changes to the defined benefit (DB) funding regime were first tabled (formally at least) three years ago in the 2020 Pensions Bill. Those changes eventually found their way into Schedule 10 of the Pension Schemes Act 2021 but are not yet in force. The DWP is currently consulting on draft regulations (Regulations) which will be made under the Act setting out the new requirements in more detail.

The Regulations do not, however, complete the picture. They leave several key aspects to be decided and dealt with by TPR in the Code. The Regulations and the Code are therefore directly linked, so any changes to the Regulations arising from the DWP’s consultation will need to be reflected in the Code.

Why has the Code been delayed?

TPR has not given specific reasons for the delay. In fact, it didn’t even formally announce it. Rather, TPR published its Corporate Plan for 2023-24 on 21 April 2023 in which it stated that it was “getting ready to launch a new DB funding code and regulatory framework in April 2024”.

Despite this slightly under the radar update from TPR, it came as no real surprise to the pensions industry. Quite simply, there is too much left to do.

Firstly, the Regulations will need to be finalised. The DWP has not yet issued its response to the consultation which closed in late October 2022. Speaking to the Work and Pensions Committee (WPC) on 22 March, Pensions Minister Laura Trott confirmed that the timing of the Regulations is dependent upon the outcome of investigations into last September’s LDI liquidity crisis. Both the WPC and the House of Lords Industry and Regulators Committee are set to give recommendations as a result of those investigations, and Ms Trott advised that the Regulations would not be finalised until those recommendations have been published and considered.

Secondly, once the Regulations have been finalised, assuming they have been amended in some way, TPR will need to update the Code to reflect them. TPR will also need to take account of any changes needed as a result of its own December 2022 consultation on the Code itself.

Finally, once it has been approved, the Code will need to lay in Parliament for 40 days. In order to for the Code to be operational by October 2023, TPR has previously indicated that it would need to lay the Code in June – potentially in just six weeks’ time. So in short, there isn’t enough time. 

The Code (and the Regulations) represent the most significant overhaul of the DB funding regime in recent years, so both the DWP and TPR will be keen to take the time needed to get the job done right the first time, so that all schemes know exactly what is expected from them going forwards.

What happens next

Unfortunately, neither the DWP nor TPR have given any indication as to when we might hear more or what changes we can expect to see, leaving the industry in limbo. Until the Regulations and the Code are finalised and operational, DB schemes should continue to comply with the existing regime.