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STOP PRESS: On 4 December 2024 the Pensions Regulator (TPR) finally published the updated employer covenant guidance for trustees of DB pension schemes, aligned with its new DB funding code of practice which was brought into effect on 12 November 2024 by the Pensions Act 2004 (Code of Practice) (Defined Benefit Funding) Appointed Day Order 2024, SI 2024/1143. Described by TPR as ‘the last piece of the jigsaw to help schemes carry out valuations under the new DB funding code’, the updated guidance includes the first regulatory definition of employer covenant aiming to provide greater market certainty and promote consistency across schemes. Key updates encompass cash flow analysis, reasonable affordability assessments, maximum affordable contributions, reliability periods, covenant longevity, and contingent assets. The updated guidance emphasises proportionality in covenant assessments and includes worked examples for complex areas. Significantly, TPR expects trustees to use the updated guidance to review whether their existing covenant analysis is focused in the right areas and remains proportionate, especially where trustees have experienced significant changes in their scheme funding position over the last few years.

TPR