DB funding code

The DB funding code sets out the Pensions Regulator’s expectations on how trustees of funded defined benefit (DB) pension schemes should plan for the monies going into the scheme from its sponsors to cover the benefit payments made from the scheme, and guidance on how to calculate these amounts. Some of these expectations are practical guidance to help trustees follow the law, and some are directly required by law. 

The code was laid before Parliament on 29 July 2024. This started the 40-day period over which the Houses of Parliament can scrutinise the code, and allowing for the Houses’ summer and conference recesses, we expect it will not formally come into force until early November 2024. However, it is applicable to all scheme funding valuations with effective dates on or after 22 September 2024.  

A DB scheme essentially provides benefits to its members from retirement, the level of which depends on the members’ length of employment and salary with the employers (the sponsors), as defined by the scheme. A DB scheme is “funded” if the scheme’s sponsors are required to provide assets to cover these benefits as they are built up (as opposed to “unfunded” schemes where sponsors pay for the benefits when they are paid to the members).  

The Pensions Regulator previously issued individual codes of practice for different topics, the DB Funding Code being the third in the series of 15. Since the consolidation of many of the individual codes into the General Code, published earlier this year, this labelling is no longer used even though the DB funding code remains a stand alone code.