TPR publishes updated DB covenant guidance
TPR publishes updated DB covenant guidance
06 Dec 2024
What you need to know
- Following implementation of the funding and investment strategy regulations and the defined benefit (DB) funding code, The Pensions Regulator (TPR) has released its updated covenant guidance.
- Assessing covenant early in the process will be key for trustees and the first valuation under the new regime will play an important part in setting the long-term strategy of the scheme.
- TPR emphasises proportionality to ensure trustees consider the right level of detail, based on the covenant support provided and the scheme’s position. Further insight is provided in the key areas of cash flow, reasonable affordability, periods of covenant reliance, contingent assets and supportable risk.
- The guidance also includes specific considerations for not-for-profit, multi-employer and limited affordability schemes.
- A number of worked examples are provided in the areas requiring trustee judgement, providing trustees with further detail on how covenant should be assessed.