TPR urges industry to not make ‘rash predictions’ on DB funding code

The Pensions Regulator (TPR) executive director of regulatory policy, analysis and advice, David Fairs, has urged the industry not to make “rash predictions” about the impact of the regulator’s upcoming defined benefit (DB) funding code.

In a blog, Fairs sought to allay fears about the parameters of its funding route options by stating that there were still multiple stages of planning to go before parameters are set.

He said that TPR was “surprised” by some of the debate and predictions that had been surfacing since it published its first consultation.

In October, LCP warned that the funding regime proposals could result in the UK’s biggest DB schemes paying an additional £40bn over the next decade, while, in November, Hymans Robertson analysis stated that 70 per cent of schemes would fail the requirements for fast track.

“While some schemes and advisers seem confident that they already know the impact the new funding code will have on DB schemes, we have yet to firm up the proposals for our second consultation,” Fairs said.

“These will be informed by responses to our first consultation, an impact assessment and the final legislative package.”

The regulator received a record of around 130 responses to its first consultation and said it was reflecting on whether any of the principles outlined in the first code need to be adjusted.

“As we advised schemes to do in our last Annual Funding Statement, we are thinking through the different economic scenarios we may encounter in a post-Covid, post-Brexit world,” Fairs wrote.

“Only once we have completed that, will we start thinking about the parameters we set for fast track. As we refine those parameters, we will look at the impact of different options.”

He noted that the regulator needs to work through the issues raised in its consultation and TPR understands that a balance needs to be struck between protecting members and ensuring flexibility.

“I am not saying ‘don’t worry, just trust us with it all’,” he added. “It is right we are held to account and pushed for answers.

“But there is some way to go on this journey and we should not be making rash predictions. More is to come. Let’s get the basics right first.”

In Pensions Age’s recent Northern Conference, TPR confirmed plans to publish its second DB funding code consultation in mid-2021.

LCP added that Fairs' blog hinted to a more accommodating approach to the funding of open DB schemes' than was previously feared by some following the first consultation.

LCP senior consultant, Shayala McRae, commented: "The latest blog from TPR could offer some ‘comfort and joy’ to open DB schemes this Christmas.

"Whilst the regulator stresses the continuity between its current position and its earlier consultation, there is a clear difference of emphasis in the latest statements. At the very least, TPR believes that its intentions may have been misunderstood and that it always planned a more flexible approach for fully open schemes with a flow of new members.

"It will be interesting to see how this is reflected in the regulations which flow from the Pension Schemes Bill and in TPR’s second round of consultation on its new funding code which is expected later in 2021."

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