The Pensions Regulator (TPR) has urged defined benefit (DB) pension scheme trustees considering a capital backed journey plan (CBJP) to engage with it at the earliest opportunity, following "significant activity" in this area.

In a blog post, TPR director of supervision, Mike Birch, noted that while CBJPs can vary in nature, more recently, TPR has seen CBJPs considered when a sponsoring employer is financially distressed including the imminent insolvency of the employer.

Although Birch acknowledged that the Pension Protection Fund (PPF) would normally be the safety net for members in those schemes, he suggested that if a CBJP can help members get benefits above PPF levels on appropriate terms then "clearly that would have [TPR's] support."

However, he clarified that TPR would need to scrutinise the CBJP to make sure that it was appropriately set up and being run well.

He stated: "We have set out in our DB superfund guidance that where CBJPs are considered in these types of circumstances, elements of our superfund guidance would be applicable. We expect to assess CBJP proposals against the guidance.

"We want to support innovation in savers’ interests and think that CBJPs may be a good option for some schemes when customised to their specific circumstances.

"We are keen to continue to engage with the market on these arrangements and to see them develop alongside other options that offer trustees greater choice without compromising on the security of members’ benefits."

Birch also noted that while CBJPs won’t work for everyone, TPR is currently having discussions with a number of schemes and providers in this area.

"So far, we have not completed any CBJP assessments," he added. "We would generally expect to confirm publicly where a particular CBJP proposal has been assessed as meeting the relevant expectations from the superfund guidance."

New guidance from TPR, which Birch confirmed is due to be published in the new year, is also set to help trustees and employers navigate alternative arrangements and highlight factors that may be relevant to trustees’ consideration of these offerings.

Ultimately, however, Birch clarified that TPR expects schemes to have trustee boards with independent decision-making authority on the way their schemes are run, including investment strategies.

Particular considerations identified by Birch included proactively engaging as early as possible with the employer and TPR, and PPF if applicable, and ensuring that trustee boards have sufficient collective knowledge and skill to navigate the pros and cons facing the scheme as a result of the arrangement.

“We are committed to enabling innovation in the DB space. We can see a useful role for CBJPs in this market where they have saver protection as their focus,” he continued.

“You can expect to hear more from us on this and other innovations in the new year. In the meantime, our message to trustees is simple: engage with us at the earliest opportunity if you are considering a CBJP to ensure you are meeting our expectations to protect savers.”

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