Set your privacy preferences

We use necessary cookies to make our website work. Cookies are small files stored on your device. We also use optional cookies to improve our services and tell us if you have seen our advertising. The data we collect is anonymised. Are you happy to accept these cookies?

View cookies

This website uses cookies. Your browser currently has cookies disabled.

Skip to main content

Making workplace pensions work

Menu

Other ways of meeting costs

CDC code in force: 31 July 2026

Indemnities and insurance

  1. We will consider any insurance policies or indemnities held by trustees in relation to running costs or financial resources that provide cover for certain costs1. We will need to be satisfied of:
    1. the details of the policy or indemnity
    2. the provider
    3. the policy holder
    4. the beneficiary
    5. any limitations of the insurer’s liability
    6. the security, strength, and enforceability of the indemnity
    7. the ability of the person providing an indemnity to meet its obligations under that indemnity
    8. the likelihood of any insurance paying out
    9. the likely time needed to settle any claim
  2. The matters above should be consistent with the elements of the scheme’s costs, assets and liquidity plan (CALP) and continuity strategy.
  3. If the beneficiary of the insurance or indemnity is not the trustee, we may place less weight on its value. We will also consider the cost of any policy in assessing whether it remains a viable part of a scheme’s financial sustainability.

Loans

  1. The ability of a scheme to take out a loan is limited. Where a scheme or the scheme proprietor is receiving support by way of a hard or soft loan, we will assess the security, enforceability, and affordability of the loan.
  2. We are of the view that in most cases it is inappropriate for a scheme to be in receipt of a formal loan, but we acknowledge that trustees may be under an obligation to repay the employer or scheme proprietor for the support it has provided to them.
  3. We may ask for details of any existing or expected borrowing by the trustees or scheme proprietor including:
    1. the identity of the lender
    2. the loan amount
    3. the interest rate
    4. the repayment date
    5. any security taken by the lender
  4. We will also consider:
    1. the ability of the scheme or proprietor to meet its repayment obligations in accordance with the agreed terms
    2. whether the scheme or proprietor requires, and has received, the sanction of the court under Part 7 of Financial Services and Markets Act (FSMA) for any of its activities

Fixed cost and compensation arrangements

  1. If the scheme has a fixed-cost arrangement with a service provider to provide services, regardless of the actual cost to the provider, we will take this into account2. We will need to be satisfied that the trustees have considered any services that might fall outside the agreement and the terms on which it may be reviewed, varied, and renewed.
  2. We will also consider any compensation that might be payable to scheme members after a triggering event3. We will need to be satisfied of:
    1. the compensation provider
    2. the basis and timescale over which compensation may be payable
    3. any limits on the compensation available
  3. We will usually not consider any cover provided by the Financial Services Compensation Scheme (FSCS) as part of the scheme’s financial sustainability requirement. If trustees believe their treatment by the FSCS is likely to be different from other schemes, they should draw this to our attention.

Offsetting revenues

  1. As a scheme matures and grows it may be producing sufficient income to increasingly offset its need for support from an employer or scheme proprietor. This might occur where, for example, fees on participating employers, or drawn from assets, are sufficient to cover running costs.
  2. We will consider requests from trustees that we should take account of such income in determining whether a scheme is meeting financial reserving requirements. Our decision will be influenced by the demonstrable and projected ability of the scheme to maintain projected levels of income above actual and projected costs. It is important that the scheme can demonstrate how it would, for example, recover from a triggering event at the same time as they experience a downturn in income.
  3. The extent to which any requested offset is considered satisfactory will also depend on what a scheme does with any generated surplus and any commitments it may have regarding spending, transferring, or redistributing any such surplus.

Schemes charging administration fees

  1. Some multi-employer CDC schemes may have participating employers who provide fees to the scheme to meet administration or other costs of the scheme. Trustees must ensure that such arrangements do not inadvertently cause these employers to meet the definition of scheme proprietor and, because of that, breach the requirement that there is only one proprietor.
  2. Any guarantees or contingent support from participating employers can be taken into account in the calculation of the scheme’s financial reserves. The haircuts applied to guarantees recognise there can be difficulty receiving timely funding from participating employers. This means it is necessary for schemes to demonstrate that they also have a proportion of their financial reserves readily available.
  3. Schemes whose financial reserving requirements are met by employer guarantees should still aim to reach a point where they hold the necessary financial reserves themselves.
  4. Trustees building their assets in this way should regularly monitor their progress towards holding their full financial reserves. The trustees should set a realistic timetable for increasing financial reserves to a point where they fully meet the level of financial reserves identified in the CALP.
  5. We will need to be satisfied that the timescale is appropriate and achievable and how it relates to the period covered by the business plan. We will expect to see the progress against this objective updated in each review of the business plan and CALP.

Legal references

1 Paragraphs 2(h), 2(j), 3(if), and 3(i) of Schedule 3 to the 2022 Regulations and Paragraphs 2(g), 2(i), 3(e), and 3(g) of Schedule 3 to the 2025 Regulations

2 Paragraph 2(i) of Schedule 3 to the 2022 Regulations and Paragraph 2(h) of Schedule 3 to 
the 2025 Regulations

3 Paragraphs 1(b)(ix) and 3(k) of Schedule 3 to the 2022 Regulations and Paragraphs 1(b)(viii) and 3(i) of Schedule 3 to the 2025 Regulations

Back to top
Is this page useful?

Thanks for your feedback.