The Pensions Regulator

Code of practice 03
Funding defined benefits

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Using the code

Cross-border schemes

• A scheme which operates cross-border within the European Union is subject to certain more stringent scheme funding requirements. In particular, such schemes must have annual actuarial valuations and each valuation must be signed by the actuary and received by the trustees within one year of its effective date. Schedules of contributions covering a two year period must be prepared or, if one is already in place, reviewed and if necessary revised within twelve months of the valuation's effective date, and any shortfalls identified must be made good within two years of the effective date.²⁹

Schemes with fewer than 100 members

• A scheme (other than a cross-border scheme) with fewer than 100 members on the effective date of the last actuarial valuation under Part 3 need not obtain actuarial reports at each anniversary between actuarial valuations³⁰ unless the scheme had 100 or more members at any time during the year.³¹ In any year when the scheme is not required to obtain an actuarial report, it is not required to issue a funding statement.³²

Multi-employer schemes

• A scheme in which there is more than one participating employer.In cases where a multi-employer scheme is segregated such that, broadly, assets and liabilities are allocated to separate sections and there is no cross-subsidy between sections, each section is treated as a separate scheme for the purposes of Part 3.³³

  For the purposes of reaching agreement with the employer where a scheme has more than one employer, a person may be nominated to act as the employers' representative either:

  • by the employers; or
  • under the rules of the scheme.³⁴

  If no nomination is made, agreement must be reached with all the employers. However, except in the case of an agreement to modify the future accrual of benefits, an employer may waive his right to agree.³⁵

Shared cost schemes

• Shared cost schemes are schemes whose provisions are such that:

  • contributions are payable by active members and the employer in proportions specified in the rules of the scheme; and
  • where there is a funding shortfall to be addressed by additional contributions, these will be from both the active members and the employer in the same specified proportions.

  Trustees of a shared cost scheme may:

  • modify their scheme such that any additional contributions required are paid by members and the employer in the specified proportions; or
  • with the employer's agreement, modify the scheme so that any additional contributions that are required are to be paid by members and the employer but with the employer paying either a higher proportion than specified in scheme rules or the entire amount.³⁶

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