DWP publishes final DB funding regulations

Janet Brown, partner, comments: “The new DB funding regime is inching its way towards the DB dance floor, but the DWP Funding regulations are still missing their partner, with the DB Code (and the TPR Fast-Track guidance) still to show up.

The main news is that the start date will be September 2024, so April valuations ‘as you are’, but come September 2024 the regulations and DB Code will be waltzing away together, dictating the direction of DB valuations going forward as the new regime hits in full.

Of course, this all assumes that there is no unexpected intermission caused by a General Election once the code is laid before Parliament, with the PM’s current working assumption being that this will take place in the second half of the year.

In the intervening 18-month period between the original consultation on the draft regulations and the finalised version, the Mansion House proposals and 2023 Autumn Statement focused on how DB schemes could use their assets more flexibly. Seemingly at odds with the then draft DWP Funding regulations and DB code, which were steering schemes to take on less risk as they mature, the final regulations have had to pirouette somewhat to accommodate wider Government aims, as well as the ‘richness of the responses’. Key areas identified for change, which will no doubt be welcomed by the industry, include:

• making clearer the flexibilities that were intended to be set out within the regulations, and that ‘even mature schemes can invest in a wide range of assets’
• reassuring schemes that investment in a sponsoring employer’s sustainable growth can be considered ‘alongside the affordability principle’, and
• making it clear that ‘open schemes can take account of new entrants and future accrual’ when determining the point at which the scheme will reach significant maturity – which should be helpful.”