Preparing for a triggering event

Assessing the risk of a triggering event

CDC code in force: 1 August 2022

We are more likely to be satisfied about a continuity strategy where the trustees have assessed and outlined:

• which triggering events are more likely to occur in relation to the scheme
• which continuity options are available to the trustees in each case
• where more than one continuity option is available, how the trustees will decide which one to follow
• any condition in the scheme’s deed and rules that would automatically cause a triggering event and pursuit of one of the continuity options
• the risk and potential impact on members following a triggering event

Planning initial response to a triggering event

We are more likely to be satisfied where the continuity strategy sets out:

• how the trustees will initially respond to a triggering event, including how and when they will first assess risks and impacts
• the process for making decisions, showing where they can be delegated in the absence of a key decision-maker
• the principles for identifying and managing conflicts of interest that may arise following a triggering event
• any role, function, or named person to be involved in producing the implementation strategy

Continuing to operate the scheme during a triggering event period

We would not be able to consider a continuity strategy unless trustees set out in the continuity strategy the matters required by regulations^PE1, including how they would:

• manage triggering event notifications in line with requirements and statutory timeframes
• decide which continuity option to pursue, if there is more than one viable continuity option available
• continue to run the scheme while fulfilling duties arising from a triggering event
• meet the costs of operating the scheme during the triggering event
• communicate with members, employers and us
• maintain members’ records
• comply with any legal requirements
• meet actuarial requirements
• manage investments and make investment decisions
• deal with any contributions due from employers and members
• ensure administrative services would continue; including a summary of any arrangement or provision under contract for service that would continue during a triggering event and pursuit of any one of the continuity options
• ensure continuity of services, including that any arrangements for appointing key roles and advisers will continue to operate in the event of any roles being left vacant

Trustees should explain the assumptions behind any estimates provided^PE2.

Choosing a continuity option

The continuity strategy must provide the framework and key steps on how the trustees will decide to pursue (or follow, where required) one of the following continuity options:

• Continuity option 1 (discharge liabilities and wind up)
• Continuity option 2 (resolve triggering event)
• Continuity option 3 (close the scheme to new contributions or members)

We are more likely to be satisfied where the trustees can show they have considered each continuity option available to them for each triggering event, in conjunction with the general requirement to address how the trustees will protect members’ interests during a triggering event period.

We expect trustees to consider when it is likely that continuity option 3 will become a viable option and give an estimated timeframe for including the details in an updated strategy. However, we do not expect trustees of a new scheme to plan for continuity option 3 when it first applies for authorisation, unless this is the only continuity option open to the trustees under the scheme rules. Where continuity option 3 is not permitted under the scheme rules, we expect that to be stated in the strategy.

Meeting the costs of dealing with a triggering event

The activities identified in the continuity strategy must be appropriately costed and assumptions clearly stated alongside estimate figures provided^PE3. Trustees must explain how they will meet the costs, noting the prohibition on increasing or adding new administration charges during a triggering event period^PE4.

Statement of administration charges

The continuity strategy must set out^PE5:

• all levels of charges for each charge structure, for the current scheme year and on an annualised basis
• whether or not any additional, third-party or other types of administration charges apply
• the reasons for imposing any of the charges above

We are more likely to be satisfied where the charge levels provided are consistent with the financial information and assumptions provided for the financial sustainability criterion.

Legal references

^PE1 Regulation 15 of the Regulations

^PE2 Regulation 15(3)(c) of the Regulations

^PE3 Regulations 15(1)(u) and 15(3)(c) of the Regulations

^PE4 Section 45 of the Act

^PE5 Regulation 16 of the Regulations