Pension news

Week ending 6 March 2020

First consultation on new funding code

The Pensions Regulator’s first formal consultation on its new funding code was published this week – a second one is expected later in the year and that will include a draft of the new code itself (which is not expected to come into force until the end of 2021). This first consultation focuses on the principles underlying the new code, but does still provide plenty of information on what TPR is thinking.

The two main developments, which TPR has been trailing for over a year, are as follows:

  • as well as technical provisions, schemes will need to have a long term objective, which is to be fully funded on a low risk funding basis (with a discount rate probably in the range gilts + 0.25% to gilts + 0.5%) within 15 to 20 years, depending upon the maturity of the scheme
  • for future funding valuations, there will be two routes that a scheme can choose in order to satisfy TPR – either they will need to demonstrate that they meet the requirements of TPR’s Fast Track approach (in effect a standardised approach whereby what’s acceptable for technical provisions assumptions, recovery plan design and investment strategy are all prescribed, relative to an employer’s covenant, and a scheme needs to meet all of the individual components), or they will need to provide a lot more information/justification under the Bespoke approach. Schemes will be able to switch approach from valuation to valuation, as appropriate.

The fine detail of the Fast Track approach is not yet specified, although there are proposals for areas like the different ways in which the strength of the discount rate might be ascertained and the structure of the recovery plan. There are also proposals for how the appropriateness of a scheme’s investment strategy could be assessed by means of a stress test. For schemes which are still open to future DB accrual, TPR states that members’ accrued benefits in such open schemes should have the same level of security as members’ accrued benefits in closed schemes.

The consultation closes on 2 June 2020.

10% general levy increase

The DWP has published a response to its consultation on the amount of the general levy due from 1 April 2020. It has decided to proceed with its preferred option of a 10% increase in the levy for 2020 (for schemes with more than 11 members) and a wider review for the 2021 levy. This levy funds the Pensions Regulator, the Pensions Ombudsman and the Money and Pensions Service.

CMI_2019 released

The Continuous Mortality Investigation has released CMI_2019, its latest mortality projections model, which reflects the experience of the population of England and Wales in 2019. The model shows that standardised mortality rates were 3.8% lower in 2019 than 2018, which is the largest fall since 2011. However, what this means in practice is that cohort life expectancies under CMI_2019 are only about one month higher at age 65 than they were under CMI_2018, and lower than in all earlier versions of the CMI model. CMI_2020 could prove to be quite different, due to the impact of Covid-19.

Recent publications


9 April 2020

In the news this week, the pensions world continues to be dominated by the impact of the Covid-19 pandemic, with the Regulator publishing more guidance for employers, the FCA delaying the implementation of its drawdown investment pathways and two household name companies deferring (or missing) their deficit recovery contributions.


Survey of company actions

Over the autumn of 2019, BAC conducted an extensive survey of the actions which companies are taking to manage their defined benefit (DB) and defined contribution (DC) pension arrangements.


Pensions Arena January 2020

2019 marked 50 years since Neil Armstrong walked on the moon and this was obviously on the Queen’s mind in her Christmas message as she talked about a bumpy year but one with small steps of progress as well. In terms of pensions, it also felt like a year of small steps and occasional bumps. In this quarter’s Arena, we take a positive look back at 2019, as well as looking forward to some expected pension developments over 2020.


Pensions Arena October 2019

Despite the very different circumstances facing individual companies, bac‘s autumn 2019 survey reveals a surprisingly consistent picture of the actions which companies are finding most attractive to manage their DB and DC pension arrangements.

Case study

DB Governance Case Studies

As DB liabilities have become legacy issues to be managed, governance has become the umbrella term for a broad range of risk management tools. In this publication, we look at the DB governance solutions we have helped our clients to implement.

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