Scheme funding in November 2013


Ten things to know now

  1. We understand that the draft Code of Practice on scheme funding is due to be published on 4 December 2013.
  2. The new affordability objective for TPR is included in the Pensions Bill 2013, which we expect to receive Royal Assent in late spring 2014. As currently drafted, TPR’s new objective in relation to scheme funding, is to minimise any adverse impact impact of its functions on the sustainable growth of an employer.
  3. We understand that the new Code and objective will come into force at the same time – sometime after the Bill gets Royal Assent. Until then, TPR’s attitude is business as usual on the basis of the current law.
  4. All valuations with effective dates from 22 September 2012 to 21 September 2013 (Tranche 8) are governed by TPR’s May 2013 annual statement on scheme funding.
  5. If a Tranche 8 scheme had been selected for the proactive or early engagement process, TPR would have written to them by now. Most of these letters went out in August, we understand.
  6. TPR issued a statement in October 2013 on double counting. In that statement it said that double counting (where deficit contributions are offset against ongoing contributions or vice versa) was unlawful. This has been widely criticised as double counting may be considered to be appropriate in some limited circumstances.
  7. In its regulatory approach, TPR is moving away from focusing on set triggers to a “suite of risk indicators” including, for example, the shape of recovery plans and issues with previous valuations.
  8. All DB trustees need to start to prepare for the new regime as this will focus on integrated risk management – addressing covenant, investment and funding risks.
  9. Trustees can benchmark themselves using TPR’s analysis published in May 2013.
  10. The Purple Book 2013, published on 5 November 2013, reported that the aggregate section 179 deficit of all schemes at 31 March 2013 was £210.8 billion. The section 179 funding ratio increased by 1% over the year to 31 March, but buyout liabilities increased by 7%.