The Pensions Regulator has confirmed that the new statutory funding requirements for defined benefit (DB) schemes and the associated new Code of Practice will not now come into force until April 2024 at the earliest. This is set out in the Regulator’s Corporate Plan for 2023/24, which also contains updates on the new General Code, pensions dashboards and the new value for money framework. It also outlines options under consideration to improve standards of governance and trusteeship.

Alongside this, the Regulator has also published updated guidance on using leveraged liability driven investment (LDI) for DB schemes. We summarise the key points from this below and will examine the contents of this (together with the latest guidance from the FCA and the recent statement from the Financial Policy Committee) in more detail our next blog.

Corporate Plan

The Regulator’s latest Corporate Plan is the first to be published since the appointed of the new Chief Executive, Nausicaa Delfas, on 1 April 2023. It covers many of the same themes as previous iterations and includes a commitment to deliver on the Regulator’s five strategic priorities:

  • Security: Savers’ money is secure.
  • Value for money: Savers get good value for their money.
  • Scrutiny of decision-making: Decisions made on behalf of savers are in their best interests.
  • Embracing innovation: The market innovates to meet savers’ needs.
  • Bold and effective regulation: The Pensions Regulator (TPR) is a bold and effective regulator.

Delay to the new funding Code

In March, the Pensions Minister indicated that the draft Funding and Investment Strategy Regulations 2023 and the Regulator’s new DB funding Code would not be finalised until she has had the opportunity to consider the recommendations made by the Work and Pension Select Committee and the House of Lord’s Industry and Regulators Committee, following their inquiries into the factors that contributed to the LDI liquidity crisis in September and October 2022. This led many to believe that the timetable for implementing the final Regulations and the new Code (which were due to come into force on 1 October 2023) would be delayed.

This has now been confirmed, with the Pensions Regulator acknowledging in its Corporate Plan that the new statutory funding requirements and Code will not now come into force until April 2024. We anticipate this will mean that the new requirements will only apply to statutory valuations with an effective date on or after 6 April 2024.

Other key points to note

The other key take-aways from this year’s Corporate Plan are:

  • the Regulator has confirmed it will continue to support schemes as they prepare to connect to pensions dashboards. The Minister has separately committed to providing an update to Parliament on the revised connection timetable prior to the Summer recess. The Pension Dashboard Programme is also due to publish a progress report shortly;
  • the new General Code will be published in Q1 (which we presume means sometime in the period between April and June 2023, although we understand its publication is imminent);
  • the Regulator is assessing options for driving up standards of governance and trusteeship, for example, through mandating that a professional trustee sits on each board or accrediting or authorising professional trustees. This will lay the foundations for it to work with the DWP to progress the most suitable approach;
  • in the meantime, the Plan makes clear that where schemes do not display high standards of governance and trusteeship, the Regulator expects swift improvements or for schemes to consolidate into an alternative, well-run scheme;
  • the response to the consultation on a new value for money framework is due in Summer 2023, and work will then begin on detailed policy development and implementation. This is likely to require legislative change;
  • the Regulator will commence its regulatory initiatives on equality, diversity and inclusion (EDI) and climate change in Q1 (indeed, the Regulator has already published its guidance to help schemes improve their EDI);
  • the Regulator has set a 2030 net zero carbon emissions target for itself and it will demonstrate how it is on track to make this transition, including setting out its plans to achieve the 2030 target in Q4 (which we presume means Jan to March 2024);
  • the Regulator plans to review its DB superfunds guidance to ensure it continues to deliver what the market needs. The Regulator also intends to publish guidance on other DB models during the year;
  • the Regulator has committed to complete its internal value for money pilot and to set out its recommendations; and
  • a priority for the coming year is the development and embedding of the Regulator’s data, digital and technology (DDaT) directorate so that it can:
    • capture, manage and analyse a range of data, making effective use of that analysis to inform and enable its work;
    • provide enhanced digital services, making it easy for advisers, trustees, employers and administrators to engage with the Regulator and fulfil their regulatory obligations; and
    • develop the platforms and products that enable these outcomes.

Updated guidance on LDI

The Regulator’s latest guidance on LDI follows the Financial Policy Committee’s statement on 29 March 2023, and replaces the Regulator’s October 2022 LDI statement and its LDI guidance from November 2022.

The latest guidance sets out the Regulator’s expectations relating to:

  • setting, operating, and maintaining a collateral buffer;
  • resilience testing;
  • trustee’s investment governance arrangements; and
  • ongoing monitoring of LDI.