The Pensions Regulator (TPR) has suggested that the draft statement of strategy for the Defined Benefit (DB) Funding Code, as well as its covenant guidance, will be shared in ‘autumn’.

Speaking at the Pensions and Lifetime Savings Association (PLSA) Investment Conference, TPR lead investment consultant, Fred Berry, also confirmed that TPR and the Department for Work and Pensions (DWP) are working on updating the regulations, telling delegates to “watch this space”.

Responding to fellow panellists concerns over the disconnect between the regulations and the draft code, with concerns that the regulations appear a lot tighter than the code, Berry stressed that he “completely gets that and DWP completely gets that as well”.

“The intent from both of us is much more in line with what's in the draft code than what's in the regulations, there were just particular circumstances that led to the regulations being published in the form that they are. It's being worked on, so watch this space," he continued.

“Similarly, for those of you who want to know what a draft statement of strategy might look like, what our covenant guidance might look like, I'm told that something is likely to appear in the autumn.”

More broadly, however, Berry argued that some of the many of the areas of concern raised by commentators have already been address in the draft code itself.

“If there's something in the commentary that you think looks a bit odd, actually go and check it out in the code - we might not be saying what the commentators think we are," he stated, emphasising the focus on proportionality.

"It's all about principles. It's about application. And we do say proportionate quite a lot of times," he added.

Berry emphasised that the DB Funding Code is also supposed to be in addressing governance and risk management as well, noting that there are steps schemes can take to make the process easier.

"A lot of the points in [the code] around encouraging trustees to do this, that and the other, are for the sake of both acknowledging existing good practicing risk management and encouraging others to adopt that risk management in a proportionate manner.

"Where we are suggesting putting that risk management stuff down in writing, there is a large element of, actually the discipline of putting it down in writing does help focus thoughts on what you're really trying to achieve and all the rest of it. That's nothing new.

"We are very alert to not wanting to overburden the industry with having to put too much, but nonetheless, if you are wanting to go through fast track, or if you're wanting a relatively easy ride through bespoke, if you can give us clear explanations of what you're doing, succinct explanations to make our life easier, and it will make your life easier."

Earlier in the session, fellow panellists, PLSA DB Committee chair, Robert Orr, Railpen head of integrated funding, Martin Hunter, and Herbert Smith Freehills partner, Rachel Pinto, raised concerns in a number of specific areas, particularly in relation to open schemes and covenant issues.

Responding to these concerns, Berry acknowledged the “unique circumstances” surrounding open DB schemes, clarifying that “nonetheless, it is one of the principles in the code that we do expect security of accrued benefits in open schemes to be comparable with that in closed schemes".

“There are lots of useful conversations that have been had and I suspect will go on being had about what exactly that means in practice and we will be working through that," he added.

However, he disagreed with concerns that TPR may be being narrowly prescriptive on its covenant guidance, instead suggesting that TPR is “in a proportionate manner, trying to encourage trustees to take a closer look at the business model underlying the sponsor to their scheme, the sponsor whose covenant is going to stand behind it”.

Share Story: