Our expectations on using future revenue to offset the costs of a triggering event
This guidance is aimed at trustees and scheme proprietors. It clarifies our expectations on the extent to which reliance on future revenue to offset financial reserving is appropriate.
Published: 31 July 2026
Having enough money set aside to cover a triggering event is one of the most important elements of a collective defined contribution pension scheme (CDC) continuing to meet authorisation criteria.
We are generally not prescriptive about the assets that must be held to meet these costs. However, it is typically better for schemes to have a known reserve to meet their duties following a triggering event rather than being dependent on an uncertain future flow of money. Our code of practice sets out our expectations in respect of financial sustainability. We will base our decision on whether a scheme should be and/or remain authorised on these expectations.
In paragraph 12 of the Financial sustainability: Other ways of meeting costs module of our CDC code, we state that we will consider requests from trustees that we should take account of income in determining whether a scheme is meeting financial reserving requirements. However, we anticipate it would be rare for us to permit a significant proportion of a scheme’s financial reserves to be covered by scheme revenue or scheme income. This is because of the potential for a scheme to have to increase their financial reserves at the same time as they experience a downturn in income. We will consider each scheme on its own individual circumstances, but we believe an offset above 20% of the financial reserving requirement is likely to be significant for the majority of schemes.
If schemes intend to propose an offset, they should be prepared to fully explain the proposed level and how it meets our expectations.