On June 10, 2014 the Pensions Regulator (the "Regulator") published its revised Code of Practice on funding defined benefits. The Code of Practice is intended to be a guide to help trustees and employers reach a funding outcome that reflects a "reasonable balance" between the need to pay benefits and minimizing the impact on the employer's plans for sustainable growth. The Regulator's new statutory objective came into force on July 14, 2014.

In response to the consultation in December 2013, the Regulator has made a number of changes to the Code of Practice. For example, the recovery period refers to eliminating the deficit over an "appropriate period", and no longer states that deficits should be eliminated as quickly as the employer can afford.

Trustees should also take a proportionate approach to risk management by having to "manage" risk rather than specifically to "mitigate" it.

The Code of Practice is awaiting parliamentary approval and is expected to come into force in the next few months. However, the Regulator recommends, in its recently published Annual Funding Statement, that the Code of Practice be taken into account, where reasonable, in current scheme valuations. The funding statement is intended to support the approach in the Code of Practice, by also emphasizing a need to recognize both the scheme's needs and the employer's plans for sustainable growth. It recommends an "open dialogue and collaborative working" between trustees and employers.

Further information on the Code of Practice can be found here and the Annual Funding Statement can be found here.