The announcement of a July general election has put defined benefit schemes with valuation dates shortly after 22 September in limbo, as there will not be enough time for the DB code to be in parliament for 40 days before funding regulations apply. 

The timing of the general election has crossed the plans of the Pensions Regulator. TPR had told the industry it would get sight of the defined benefit funding code before 22 September, as the DB funding regulations will apply to schemes with valuation dates after this, but this now seems unlikely with parliament dissolved until the election and new ministers yet to be appointed. 

Though there is no legal requirement to follow TPR’s code, schemes are expected to take it into account in their valuations, as the code sets out how the regulator interprets the government’s regulations. 

There will now not be enough time for the code to be laid in parliament for the required six weeks – this would have needed to happen in June – leaving these schemes in limbo. 

“You could ask schemes to comply notwithstanding the code does not exist,” said partner at consultancy LCP, David Fairs, who is a former policy director of TPR. “One challenge is that TPR points to the code to define ‘significant maturity’.” 

This makes complying without the code difficult because schemes cannot know how TPR will define ‘significant maturity’. A key requirement in the new regulations is that by the time a scheme is significantly mature, there is low dependency on the sponsoring employer with high resilience to funding and investment risks. The Department for Work and Pensions had initially suggested that schemes were significantly mature when their liabilities reach a duration of 12 years, but then said that TPR would “reassess and revise” the point of significant maturity in the DB code. 

Fairs expects TPR will “push DWP quite hard as soon as a new minister is appointed to lay the code” and publish it as soon as possible, even if it has not had 40 days in parliament. “It might not be fully in force, but at least people have an idea,” he said.  

Fairs admitted that a new minister might want to reflect on, perhaps even change the code, however. In that case, “TPR would have to make an announcement about what it meant with significant maturity. But that would be challenging because you’d essentially be ignoring parliamentary process,” he observed. “If they did that, the words would have to be chosen quite carefully.”  

The Labour party, tipped to win a majority, currently has no shadow pensions minister, while the pensions minister of the Conservative party, Paul Maynard, broke parliamentary expenses rules. Prime Minister Rishi Sunak has not said if he would keep Maynard in post.
   

    
While the new funding regime applies to schemes with valuation dates after September, he also pointed out that they have 15 months to complete these exercises, giving them potentially some time to wait for the code.   

A delay is also possible because the regulator will want to finalise what information it wants to receive from schemes for assessing valuations and build the systems to do this, Fairs said. He noted there had been “some pushback from industry” on the amounts of data the regulator said schemes would need to send.  

“People who are quick off the blocks might not be able to submit until spring 2025,” he suggested.  

For Lesley Harrold, a consultant for law firm Norton Rose Fulbright, the fact parliamentary time has now run out to get the code ready for 22 September raises a host of questions.  

“Depending on the shape of the new government, will they even want to follow what's currently in place?” she said, but added: “We're supposing that they will and not and not start from scratch again.”  

Harrold said if valuations were submitted to TPR soon after 22 September, “I imagine it would be scrutinising them quite closely”.  

Although a draft code was published at the end of 2022, “who knows what might change in there”, she remarked. In light of this, trustees might delay and hope that the code will be in place sooner rather than later, she said.  

Harrold agreed that TPR might need to adjust its own IT systems to accept information on the valuations under the new system.   

A spokesperson for the Pensions Regulator said that during the pre-election period, employers and trustees must continue to comply with their pension duties, adding: “We are working with government and other regulators on any implications for the timetable of our work.” 

While parliament is due to go into summer recess shortly after the election, returning only in September, the Labour party could shorten MPs’ summer recess if it wins, the Financial Times reported earlier this month. This would potentially give time for the code to be in parliament for the required period. 
   

   

David Fairs

Lesley Browning

Tim Middleton