DB Funding Code Consultation - Isio's response
Our response to the draft Funding Code of Practice (the “Code”) and Fast Track regulatory approach consultations.
Our paper sets out Isio's responses to the detailed questions raised in the consultation, along with our high-level comments below:
In addition, we believe the following areas are worthy of consideration in refining the draft Code.
- We would prefer to see less prescription in the draft Code around the setting of assumptions. We suggest that the assumption Appendices are moved to into the Fast Track guidance with the Code containing less detail and requiring evidence-based/consistent assumptions with an overall appropriate level of prudence.
- TPR will have to set its preferred balance between how easy it is to comply via Fast Track and the appropriate level of tolerable risk it is willing to accept. If TPR wants to encourage schemes to adopt Fast Track, we would suggest that the level of compliance is minimised. This should come in the form of a simplified Statement of Strategy, lighter touch reporting and minimal covenant analysis requirements (as effectively the approach is covenant neutral).
- A yield curve approach means different things to different people. For example, a yield curve approach can be a single equivalent basis derived from yield curves using sample or scheme cashflows. To provide flexibility and enhance pragmatism we would welcome clarification that advisors can use their judgement when adopting a suitable ‘yield curve’ approach.
- As noted above it is important to reduce the burden on smaller schemes, therefore we recommend that the small scheme definition is extended in both the Code and Fast Track to capture more schemes. A scheme should be classified as small if it has 100 members or less or the asset size is less than £25M.
- While we don’t believe the code should be expanded to try and deal with every type of scheme specific circumstance, it would be worth including a comment to say that trustees should look to apply the principles in non-standard scheme designs. Examples include hybrid arrangements (DB with a DC underpin and vice versa), cash balance, shared cost, etc.
Read Iain McLellan's (Head of Research and Development) comments in Professional Pensions and Pensions Age.