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DB Funding Code Consultation

The Pensions Regulator (“TPR”) has today issued its long awaited second consultation on the draft Funding Code of Practice. The consultation will run over 14 weeks until 24th March 2023.


The draft code follows the broad thrust of TPR’s original consultation, with the existing principle based rules reframed into a more mechanistic approach.  With most schemes being better funded that they have ever been, many will view the proposed new rules as additional bureaucracy rather than proportionate risk management. The “Fast-track” or “Bespoke” dual-track compliance approach has been retained, but TPR has dropped the benchmarking of the former against the latter. 

The requirements are complicated. Trustees and sponsors will need to invest time to understand the new rules (due to be in force for valuations with effective dates after October 2023) and what it means for their scheme-specific situation.

It is clear that TPR have decided to push on with the consultation, rather than wait to reflect on any ‘lessons learned’ from recent market events. This leaves us in a bit of a chicken and egg situation, as TPR have commenced their consultation before the Department of Work and Pensions (“DWP”) have finalised the underpinning Regulations. 

Although the draft Regulations were broadly supported there was significant push back from across the industry on the level of prescription they might introduce on investment strategies. Therefore, where any changes that are made to the Regulations, these will then have to be reflected in the Funding Code.

The Code of Practice in detail

We've put together a condensed summary that covers everything you need to know to get up to speed with the new Funding Code of Practice.

Recapping on the first Defined Benefit Funding Code Consultation (2020)

The consultation follows TPR’s first consultation in 2020 and the DWP’s Regulation consultation earlier this year.  If you are interested in a quick recap, you can find a 5 minute video summary below.

Recapping the first defined benefit funding code consultation 

In this video, we recap on the first Defined Benefit funding code consultation, looking at the key principles that should govern the funding of defined benefit schemes, the tests required for trustees to meet fast track, the justification for bespoke options and commentary on the role of the sponsor covenant and investment strategy.

Jump to each individual section below

Section one: Key principles that should govern the funding of a DB scheme
Section two: Fast track requirements
Section three: The bespoke option
Section four: The role of sponsor covenant and investment strategy
Recapping the DWP’s Funding and Investment Regulations

Isio’s Head of Pensions Research & Development, Iain McLellan, looks at the Department for Work and Pensions’ funding and investment regulations. He recaps on the low dependency funding and investment strategy along with summarising 8 key points to be aware of from the draft Regulations.

Jump to each individual section below

Section one: An overview of the DWP’s Funding and Investment Regulations
Section two: 8 key points to be aware of from the draft Regulations