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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | 8月 2024
The Regulator’s finalised draft of the DB funding code is the final piece of the jigsaw in the new funding and investment strategy regime. After much delay the new code was laid before Parliament on July 29, 2024.
The DWP’s explanatory memorandum to the draft Code reflects the funding regulations (which came into force on April 6, 2024), consultation responses received and extensive engagement by the Regulator with the pensions industry. It is described as providing “further flexibility for scheme specific approaches to risk-taking and for open schemes”.
There are several key changes reflected in the code since the version first consulted on in December 2022:
Alongside the draft code, the Regulator has also published its response to the December 2022 consultation on the code, as well as its response to the fast track and regulatory approach consultation.
Guidance from the Regulator on the employer covenant and the format for statements of strategy is still awaited.
Comment
The improved clarity and flexibility in the revised draft code has been welcomed and trustees will now be able to assess what the new funding regime means for their scheme.
The delay to the laying of the code before Parliament means that it will come into force after September 22, 2024, the effective scheme valuation date triggering the start of the new code’s applicability. Some schemes with valuation dates immediately after September 22 may find themselves “between codes”, with the new code coming into force mid-valuation. The Regulator has said that such schemes “can use the new DB funding code as the base for their approach”. It intends to contact such schemes and “take a reasonable regulatory approach”.
The final draft reflects the pensions landscape as it now is following the gilts crisis of 2022 and the Mansion House reforms subsequently announced in 2023. The Regulator has been able to take a balanced approach to its oversight of the code given the significant improvements in DB scheme funding levels since the first draft was published.
The Regulator has also taken into account alternative options for schemes such as running on, dealing with surplus and the emerging superfunds regime.
The delay in introduction of the new code also means that trustees face a less pressured environment for making strategic decisions. Schemes that are now well on the way to being fully funded have the opportunity to review their strategies and objectives and to reassess the full range of options available to them.
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