TPR to publish new CDC code before the end of January – Law & Regulation

In a blog post published on Monday, Counsell said the consultation will reflect regulations for CDC schemes that will be published by the Department for Work and Pensions and laid before parliament also in January.

He said: “CDC schemes have the potential to change the pensions landscape by offering savers and employers a viable alternative to traditional defined benefit and defined contribution schemes. We welcome innovation and we look forward to working with the DWP and the industry on the development and expansion of CDC schemes.”

On January 18, the Work and Pensions Committee issued a report urging the government to continue its work on CDC schemes. Royal Mail is expected to launch the first CDC scheme this year.

“We await with interest TPR’s consultation on the code of practice, which comes at a time when CDC appears to have a real opportunity to build momentum with Royal Mail’s scheme due to launch this year,” said Steven Taylor, partner at LCP. 

“However, other large employers will still need to be convinced of the merits of CDC, and TPR will need to make sure its approach balances risks appropriately and avoids introducing onerous hurdles that prevent these innovative new models from flourishing.”

Counsell also confirmed that the regulator’s second consultation on the DB funding code is expected to be launched in late summer, after the DWP publishes its consultation on draft funding and investment regulations.

He said: “We want to learn from DWP’s consultation on the draft funding and investment regulations, which we expect to be published in spring 2022. And we want to ensure that stakeholders have ample opportunity to engage with and input into our proposals as they are developing.”

The new code brings two approaches to funding: fast-track and bespoke route. Schemes that opt for a prescriptive fast-track funding arrangement would be subject to less regulatory scrutiny, while those opting for a bespoke arrangement would face stricter oversight.

But the new draft rules have been delayed, initially expected to be in place by December 2022.

Counsell also revealed that the regulator’s single code of practice, initially consulted on in March, is expected to be laid before parliament this summer.

The new code is intended to combine 10 of the 15 existing codes of practice into one modular document, aiming to make it easier for governing bodies in the pensions industry, along with professional services providers, to identify their legal duties, as well as TPR’s advice on how to meet them.

However, the consultation was controversial from the start, not least because the proposed single code went much further than merely combining existing documents. In August, the watchdog announced that it would drop the limit on “unregulated investments” from the new code, which many industry commentators said would limit schemes’ investments in infrastructure and private equity, as well as start-up businesses, all of which the government is keen to see increase.

Counsell said: “This user-friendly new code will show governing bodies how to approach governance and administration and provide consistent expectations across different types of schemes set at a level we consider appropriate for any well-run scheme. 

“We hope the new code, expected to be laid before parliament this summer, makes it easier for governing bodies, and those providing them with professional services, to distinguish between legal duties they must meet and what we expect should be done to comply with those duties.”