The Pensions Regulator (TPR) has confirmed that the Defined Benefit (DB) Funding Code regulations will be introduced in the new year, with TPR’s DB Funding Code to be shared “on the appropriate timeline” ahead of its implementation in April 2024.

Asked about the expected timing for the code as part of the Work and Pension Committee’s DB inquiry, TPR interim director of regulatory policy, analysis and advice, Louise Davey, confirmed the code remains on track for the April 2024 launch date.

She stated: "It is anticipated at the moment that the regulations will be introduced in the new year and will be in force by April 2024, and they'll be effective for schemes that have valuations from autumn 2024.

"Our code of practice will also come in on the appropriate timeline to be enforced for those dates."

The WPC also raised broader queries around the DB Funding Code, however, with particular concerns raised around the idea that there could be tensions between the aspirations of the Chancellor's Mansion House reforms and the DB Funding Code.

Dismissing these concerns, TPR chief executive, Nausicaa Delfas, confirmed that TPR has revised its DB Funding Code, and believes that it is "entirely consistent" with the government's Mansion House reforms because it it allows for pension schemes to invest in diverse assets.

Adding to this, Delfas stated: "We are obviously aware through the various consultation processes that we've been through that there are some perceptions that [the DB Funding Code] will introduce further risk aversion.

"However, that's not the policy intention and we have heard the responses to the consultation, and the evidence that this committee has heard, and we are confident that the final version of the regulations and code will make clear that flexibility.

"The objective is not to remove all risk from the DB system and we're very clear that there are a good number of schemes that have the capacity to take on a significant amount of risk in their investment strategy, if that's what they chose to do, whether that's because they are immature, because they were open to new members and future accrual, or because they have a strong employer covenant that can support the scheme should the investment returns not to play out as hoped, and that's the key."

Davey also confirmed that, even with mature schemes, there's still significant scope for them to be investing in growth assets, with this also made clear in the code of practice.

"So we don't accept that the Mansion House reforms and the DB Funding Code are inconsistent," she added.

TPR was also asked more broadly about concerns around "inappropriate risk aversion" being applied in relation to DB schemes, with WPC chair, Stephen Timms, noting that whilst the Universities Superannuation Scheme (USS) had previously received advice suggesting that 30 years should be a reasonable time horizon for the employer covenant, TPR wrote back suggesting that a longer term horizon of 20 years would be more appropriate, prompting concerns that the scheme could be forced to de-risk unnecessarily.

Responding to this query, Delfas argued that the key point was the need to undertake realistic long-term planning.

"So where long term planning is taking place it's reasonable to to say actually you can't see forever into the future, so assumptions need to be made about actually how long might the scheme stay open," she explained.

"But in reality if that scheme does stay open and if it doesn't mature, then there should be no actual impact on the de-risking that would need to take place, and because valuations are done on a rolling basis, that position is updated every three years."

Timms also asked TPR to follow up with the committee to share further specific updates on this case.

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