The Pensions Regulator’s new defined benefit (DB) funding code of practice has come into force, providing trustees with an update of its 2006 guidelines.
The new code, “Funding Defined Benefits”, was originally published in December 2013 and underwent consultation until February 2014.
A final, revised version was published in June.
The code updates the regulatory framework for DB trustees and now takes into account the regulator’s new statutory objective – to consider whether scheme recovery plans take into account sponsoring employers’ sustainable growth.
It also provides practical guidance on how trustees can comply with legal requirements.
Original versions of the Code came under criticism from the industry for being too prescriptive and long-winded.
The regulator eventually took heed, splitting the Code into regulatory requirements and guidance.
Interim executive director for DB regulation, Geoff Cruickshank, said TPR was keen to understand how trustees and employers used the code, and which aspects needed further work.
“We expect trustees and employers to take the new code into account,” he said. “Our case teams have undergone a programme of training to ensure the code is applied consistently between cases with similar facts.”
In other news, the battle for bulk annuity consultancy work has intensified as Aon Hewitt and legal firm Eversheds launched a fixed fee buy-in or buyout service for DB schemes.
Named Pathway, the package offers schemes pre-negotiated contract terms with bulk annuity insurers, increasing certainty of price and speeding up deal negotiations.
In reaction to the launch, consultancy LCP, which advises trustees and sponsors on bulk annuity deals, said it just completed its tenth fixed fee bulk annuity transaction, after launching its service in 2012.
Aon Hewitt said Pathway has been designed with insurers to ensure they prioritise cases and commit to shorter turnaround times.
LCP said its process was designed to manage key challenges in running bulk annuity transactions, and that it provides certainty on legal and actuarial costs.
Partner at LCP, Emma Watkins, said: “One of the key features of the service is that contracts are pre-negotiated with insurers, which gives trustees immediate access to better terms than the insurer’s standard contracts.”
Dominic Grimley, principal consultant at Aon Hewitt, said: “In a busy market, it is more important than ever that a firm plan of action and clear objectives are adopted to get the right deal at the right time.
“Annuity purchase involves a number of moving parts.”
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