The Pensions Regulator’s (TPR) new Defined Benefit (DB) Funding Code has been laid in parliament, in what has been highlighted by the regulator as a "significant milestone" for the trillion-pound DB market.

Laid following extensive industry consultation, the new DB Funding Code aims to complement the change in regulations and sets out a framework protecting savers while giving flexibility to the market.

The new code sets out to trustees, sponsoring employers and advisers TPR’s guidance and expectations on how to comply with the Funding and Investment Strategy requirements.

In particular, the new DB Funding Code aims to encourage good long-term planning and risk management behaviours, and give guidance on setting recovery plans in line with what is reasonably affordable for their sponsor.

It also includes guidance on how trustees can set funding plans in line with the support their sponsors can provide and how maturing schemes can move to a point of low dependency on their sponsor.

Once in force, it will replace the existing DB funding code, introduced in 2014, for valuations with effective dates on or after 22 September 2024.

TPR executive director of market oversight, Neil Bull, highlighted the laying of the code as the "final step" in realising a new DB funding code that reflects the changing DB landscape.

He stated: "The DB funding code strikes the right balance between security and flexibility for scheme specific funding and investment approaches in the interests of members and employers.

“It will enhance the system as well as provide a framework to protect millions of savers. It is a significant step, and we would like to thank all those who have contributed their views during our extensive consultation.

"Together we have developed a DB funding code that will support trustees in effectively planning and managing the long-term funding of their scheme today, and in the future.

“Trustees, their advisers and sponsoring employers should read the new DB funding code to appraise themselves of what TPR sees as good practice.”

TPR also pointed out that while many schemes are currently well funded, the DB funding code outlines principles and requirements to support schemes no matter what their financial positions in the months and years ahead.

TPR also confirmed that whilst seven in ten private sector DB schemes are closed to future accrual and 4 per cent remain open to new members, the revised DB Funding Code also includes the "necessary flexibilities" to be relevant and supportive of all DB schemes, including open ones.

The DB regulations, which align with the DB Funding Code, came into force in April this year and apply to valuations with effective dates on or after 22 September 2024.

Given this, TPR acknowledged that there will be a gap between when the requirements of the Funding and Investment Strategy Regulations start applying and the new DB funding code is in force.

However, it confirmed that schemes with valuation dates in this period can use the new DB funding code as the base for their approach.

TPR will also be communicating with affected schemes directly, and confirmed that it will take a “reasonable” regulatory approach to them.

Alongside the DB Funding Code, TPR has published its response to its consultations on the new DB funding code and its regulatory approach, including Fast Track and Bespoke valuation submissions, including final fast track parameters.

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