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DB valuations from 23 September 2024: TPR’s updated employer covenant guidance, key changes under the 2024 funding regulations, and practical steps for trustees

Published on: 09 January 2025

Published by a LexisNexis Pensions expert

Legal News

Article summary

What is the background to TPR's updated covenant guidance?

TPR issues guidance that accompanies its Codes of Practice, signalling how it expects stakeholders to meet legislation it oversees. Unlike the Codes, this guidance is not formally approved by the Secretary of State; however, it is:

an indicator of TPR’s likely enforcement stance; and
persuasive before the courts, though not legally binding,

so it remains material when tackling any regulatory matter. The covenant guidance addresses how to assess the employer covenant during the triennial valuation of a DB pension scheme. Trustees must conduct that valuation at least every three years and, in most cases, agree it with the employer, as required by PeA 2004, Pt 3. Historically, covenant-related guidance flowed from trustees’ duties to adopt appropriate valuation assumptions and, in doing so, to identify scheme risks and adopt a prudent approach to them. The strength of the covenant—namely, the employer’s capacity to continue supporting the scheme—is a pertinent risk in that assessment...

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