The DB Funding Code and Funding Regulations – Regulator comments on timing

For some time, the Regulator has been working with the DWP on updating the draft Occupational Pension Schemes (Funding and Investment Strategy and Amendment) Regulations 2023.

The new code, originally anticipated to be finalised and in force in 2023, has been deferred until April 2024. However, until any amendments to the Regulations appear, and are consulted on and finalised, this remains uncertain. In addition, the low dependency investment allocation for "significantly mature" schemes envisaged by the draft code and Regulations does not dovetail easily with the Chancellor's Mansion House proposals and subsequent Autumn Statement for pension schemes to have the flexibility to invest in growth assets. The Regulator has stated that it does not believe its funding code will hinder growth investments for schemes.

In its Corporate Plan for 2023-24, the Regulator stated that the code would be effective from April 2024. This timescale has recently been reaffirmed by Nausicaa Delfas, the Regulator's Chief Executive, when giving evidence to the Work and Pensions Committee on November 29, 2023. Ms Delfas stated that the new DB funding Regulations "will be introduced in the New Year and will be in force by April 2024" with effect for schemes having valuations from Autumn 2024. The new code "will also come in on the appropriate timeline to be enforced for those dates."

However, any revisions which have been deemed necessary following the consultation on the Funding and Investment Regulations (and by extension, any resultant changes to the draft funding code) have yet to be published. April 2024 is fast approaching and there is concern that the uncertainty for schemes continues.

The Regulator has also said it will produce revised covenant guidance.