New defined-benefit funding code: collaboration and flexibility
By Anne-Marie Winton
The Pensions Regulator’s new Code of Practice on funding defined benefits was laid before Parliament on 10 June and will formally come into force 40 sitting parliamentary days after that (sometime in the autumn). There is no change to the legal requirements governing defined-benefits funding, just a refocusing of the regulator’s approach.
The background to the code is the regulator’s new statutory objective ‘to minimise any adverse impact on the sustainable growth of the employer’. It encourages collaborative working between the employer and trustees to reach an ‘appropriate scheme funding outcome that reflects a reasonable balance between the need to pay the promised benefits and minimising any adverse impact on an employer’s sustainable growth’. The code recognises that trustees may take some risk to achieve their objectives — but they should understand and manage that risk effectively. Trustees should take a proportionate approach, based on the size and funding level of the scheme, complexity of investments, employer covenant and potential costs and benefits.
The code contains nine principles…
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